J Sainsbury (SBRY) has reported robust fourth-quarter sales, an impressive feat given the tough retail environment. Same-store sales, excluding food, grew 3.6 per cent, while total sales were up 6.3 per cent. For the full year, total sales growth, excluding fuel, were roughly 4.3 per cent, or 1.8 per cent on a like-for-like basis.
In a market where the top players vie for every inch of market share and margin gain, and consumers are trading down to fast-growing discounters such as Aldi and Lidl, Sainsbury's outperformance is a vindication of chief executive Justin King's strategy.
The convenience business was a huge driver of growth. Here sales rose 18 per cent year on year, driven by a combination of new space and same-store growth. In the quarter, Sainsbury's added three new supermarkets and 19 convenience stores, bringing the total over the full year to 14 supermarkets, eight extensions and 87 convenience outlets.
Growing at nearly three times the rate of food, general merchandise and clothing is also taking off. Annual sales reached £1bn in February, with January the best on record, boasting 19 per cent year-on-year growth. Sales of Sainsbury's TU clothing collection increased 20 per cent, while home accessories rose 25 per cent. Meanwhile, online sales grew nearly 20 per cent.
This level of growth is also translating into market share. In the 12 weeks to 17 February, Sainsbury's was the only one of the big four supermarkets to increase its share of the grocery market, according to Kantar Worldpanel. Meanwhile, WM Morrison (MRW) was the only retailer to lose market share.
For its part, Morrison is struggling with falling sales and profits. A recent surprise announcement that it is looking to strike a deal with Ocado (OCDO) to use the online grocer's technology to launch its own much-needed cyber food business doesn't do much to inspire confidence, either. While the tie-up might be good news for Ocado, it seems strange that Morrison has chosen a partner that has never posted a pre-tax profit.
That said, Ocado has just opened a second fulfilment centre in Warwickshire, which it believes will give it the scale and technology it needs to be profitable. In a recent trading update, Ocado reported a 14 per cent increase in gross sales for the 12 weeks to 24 February and a 12 per cent rise in weekly orders.
