Non-food sales help Sainsbury

6th October 2010

Sainsbury's second quarter like for likes excluding fuel grew 2.9% versus last time, easily topping the 1.1% it delivered in the first quarter, and well ahead of the 0.4% growth revealed yesterday by Tesco for the same period.

The healthy performance by Sainsbury was aided by strong growth across its non-food offerings, including electricals, white goods and clothes, with childrenswear in particular putting in a sterling performance. Sainsbury's says its non-food sales are now growing at three times the rate of food sales.

Elsewhere at Sainsbury's, online sales are up 25% and a relaunch of its popular Taste the Difference premium range has been well received by customers.

While both Sainsbury and Tesco are concerned about food commodity inflation, they are even more worried about rising fuel prices which always tend to have big impact on household budgets both in real terms and in visibly impacting broader spending decisions.  

Tesco's results yesterday were deemed by the market to be a little on the light side, especially on the domestic front, with growth reliant on its overseas markets, especially Asia. As Verdict analyst Neil Saunders points out in the Wall Street Journal, the performance makes Sainsbury's numbers today seem all the more weighty.

Both chains are experiencing challenging conditions at home. The government's spending review, however, could lead to further pressure on household budget and that will inevitably impact their domestic operations.

Looking ahead near term then, Tesco's global presence- it operates in 14 countries –  could help to an extent in offsetting tough trading conditions at home.

By contrast Sainsbury could find it more challenging, focussed as it is solely on the UK. The market, however, is expecting it to launch outlets overseas. As this FT article notes, it is currently considering seriously an expansion into China.

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