Sainsbury's Continues Its Ascent

UK grocery retailer Sainsbury's has announced strong half-year results for the 28 weeks to the end of September, beating analysts' expectations and immediately rising on the FTSE. Sainsbury's has been the only one of the 'big four' UK supermarkets to gain market share in the last year, with Tesco, Morrisons and Walmart-owned Asda struggling to combat the rise of discount retailers Aldi and Lidl, as well as higher-end operators Waitrose and Marks & Spencer.

Sainsbury's has delivered 35 consecutive quarters of like-for-like sales growth, resulting in the firm holding its largest share of the UK grocery market in a decade. In its half-year results it recorded a 9.1% year-on-year (y-o-y) increase in group profits, to GBP433mn, as well as like-for-like sales growth (excluding fuel) of 1.4% y-o-y. As a result, the company's market share now stands at 16.8%, up from 16.7% this time last year. Sainsbury's like-for-like sales growth is particularly encouraging, as the first-half figure improved upon similar results in both Q313 and Q114, indicating that the company's strong performance shows no sign of slowing.

Sainsbury's recent strong growth, especially in comparison with its major rivals, has helped drive its share price up by 20% in the past year. The company's management will be further buoyed by the news that UK inflation has fallen sharply, down to 2.2% in October from 2.7% in September . Though this will take a great deal of pressure off British consumers, prices are still rising almost three times as fast as current wages. Sainsbury's consistent growth is all the more impressive when contextualised in this manner.

Strong Outperformance
Rebased Share Price Against Select Competitors (31/12/2012=100)

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This article is tagged to:
Sector: Food & Drink, Retail
Geography: United Kingdom

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