’Best Christmas ever’ for Sainsburys

British grocer J Sainsbury reported its “best Christmas ever” today but warned that consumers were likely to tighten their belts in the early part of 2014 and cut its sales growth forecast accordingly.

"We expect customers to spend cautiously in the few months following Christmas, in an attempt to rebalance the household finances," chief executive Justin King said.

That caution and a revision to its sales forecast for the full year sent the share price down by up to 2.7 per cent to 359 pence, trimming a gain of 11 per cent over the last year.

Though there are signs of an improving economy Britain's major food retailers are finding the going tough as consumers' disposable incomes remain under pressure from wage rises not keeping up with inflation. Analysts reckon all of the UK's "big four" grocers - Tesco, Wal-Mart's Asda, Sainsbury's and Morrisons - lost market share and saw like-for-like sales volumes decline in the run-up to Christmas, reflecting a subdued overall market and increased promotional activity.

“It’s the consumer back-drop that really makes it tough. If people haven’t got the money to spend, no matter how hard we try competitively as an industry, it won’t get spent,” King told reporters.

Sainsbury’s which trails market leader Tesco and is battling with Asda to be the UK’s second-biggest grocer, said sales at stores that have been open over a year rose 0.2 per cent, excluding fuel, in the 14 weeks to January 4th, its fiscal third quarter, with total sales up 2.7 per cent.

Sainsbury’s strategy is focused on own-brand products and investing in online and local convenience store channels. In its third quarter online grocery sales rose over 10 per cent, while convenience sales were up nearly 18 per cent. That meant like-for-like sales in its core stores were down.

Reuters