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Sainsbury’s ‘Food First’ strategy seen supporting mid-single digit sales growth

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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
After arch-rival Tesco (TSCO) released forecast-beating quarterly sales earlier this month, with strong like-for-like growth across its UK stores, all eyes are on the next trading update from Sainsbury’s (SBRY) on 2 July to see whether it has managed to maintain its recent momentum.
In April, the supermarket chain said it had enjoyed its strongest-ever year of grocery sales in the 12 months to start of March with record market share gains and volume growth accelerating every quarter thanks to its ‘Food First’ strategy.
The firm also said it was ‘confident of delivering strong profit growth’ in the year ahead driven by volume gains, further growth in Nectar’s contribution and a ‘resilient’ performance from Argos.
According to retail consultants Kantar, in the 12 weeks to the middle of May – which more or less coincides with the firm’s first quarter – Sainsbury’s grew its sales by 5.6% in value terms, which was on a par with Tesco and ahead of the overall grocery market which saw a 3.6% increase.
The group’s market share rose to 15.1% compared with 14.8% in the same period a year ago, while smaller rival Asda saw its share sink from 13.9% to 12.8% and Morrison’s maintained its 8.6% market share.
Clive Black, head of consumer research at house broker Shore Capital, sees Sainsbury’s reporting ‘excellent’ progress in first-quarter sales, with mid-single digit food sales growth – consistent with Kantar’s figures – offset by negative non-food growth, although he doesn’t expect to adjust his earnings forecasts.
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