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Sales decline at Sainsbury's

Sales at supermarket chain Sainsbury's dipped in the fourth quarter and earnings look under pressure for 2014.
March 18, 2014

Sales growth stalled at supermarket chain Sainsbury's (SBRY) in the fourth quarter, but the 3.2 per cent drop in like-for-like revenue should be put into context. The supermarket was up against tough comparatives as this time last year it benefitted from the discovery of horsemeat in the products of some of its peers, as well as an earlier Easter and Mother's Day.

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And, despite a sluggish market and competition from discount grocers, Sainsbury's managed to maintain its market share at around 17 per cent of the total grocery market, in contrast to rivals Tesco (TSCO) and Morrisons (MRW) who have both seen discounters eat into their market share. The overall grocery market is reported to be growing at its slowest rate since 2005, which also happens to be the last time Sainsbury reported a reversal in sales growth.

Sainsbury's own-brand ranges are continuing to sell well, the general merchandise and clothing business is growing and sales in the convenience channel rose 15 per cent in the quarter. Online sales growth eased back to 6 per cent, but management put that down to reduced marketing while the website is being overhauled.

The consensus adjusted pre-tax profit forecast for the full year is £792m, on flat underlying sales, while operating profit is likely to take a hit next year given that Sainsbury's is one of a string of supermarkets to cut prices on staple goods such as milk, bread and eggs in recent weeks.