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Retail: Grocer Sainsbury's beats Christmas forecasts

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UK grocer Sainsbury's reported a better-than-expected Christmas quarter, boosting its shares and providing a rare bright spot in an industry convulsed by the march of the discounters.

The firm, which trails troubled market leader Tesco and Wal-Mart Stores' Asda by sales, said it remained cautious about prospects for its full financial year with food price deflation and intense competition likely to continue.

Sales excluding fuel at stores open more than a year fell 1.7pc in the 14 weeks to January 3, its fiscal third quarter, an improvement after a second-quarter drop of 2.8pc.

Analysts had forecast 2.5pc-4.4pc sales fall in the third quarter.

Shares in Sainsbury's, down 36pc during the last year, rose 4pc while Tesco and fourth-placed player Morrisons rose 3pc.

Analysts welcomed the performance but noted that Sainsbury's remained vulnerable to a Tesco fightback, and to discounters Aldi and Lidl who have won market share by offering products at a low price with fewer ranges.

"Sainsbury's numbers were better than expected but I am not a buyer of the stock for now, as top line guidance remains unchanged," said Securequity sales trader Jawaid Afsar.

"Sainsbury's had outperformed rivals for years, thanks to a strategy focused on own-brand products and the quality of its food, while expanding its convenience and online businesses. But it too has been hurt by the rise of the German discounters."

(Reuters)

Reuters