Sainsbury slashes full-year sales guidance - UPDATE

8th Jan 2014 14:26

- Full-year sales forecast cut- Like-for-like sales flat in Q3- Panmure issues 'hold' rating Sainsbury's shares declined after the UK supermarket cut its full-year sales guidance as it expects customers to spend cautiously in the next few months. The company predicts sales will increase by just under 1% in this financial year, compared to the previous forecast of a sales rise between 1% and 1.5%.Chief Executive Officer Justin King said customers held back on spending in October and November before dipping into their pockets in the six weeks of Christmas. "As with last year, we expect customers to spend cautiously in the few months following Christmas, in an attempt to rebalance the household finances," King said in a trading update for the third quarter. "The general economic backdrop remains uncertain for many families[...]"In the 14 weeks to January 4th, like-for-like sales were flat, or up 0.2% excluding fuel, marking a slowdown from the second quarter's growth of 2%. Total sales rose 2.5% in the face of challenging trading conditions. Excluding fuel, total sales were up 2.7%.The seven days prior to Christmas was the busiest trading week with more than 28m transactions. The biggest trading day was December 23rd with customers spending nearly £17m."We couldn't have achieved growth for the quarter if it hadn't been for the days before Christmas," King told investors after the trading update was released.Own brand products performed strongly with the Taste the Difference range up 10%.The company sold more than 100,000 Taste the Difference fresh turkeys and turkey crowns, nearly half of which were Sainsbury's Norfolk Blacks.The Christmas food ordering service was more popular with more than 100,000 orders, up 24% year-on-year.Sainsbury's convenience business grew 18% and reached record sales on Christmas Eve of £7m. "This underscores how customers choose convenience stores to top-up their main supermarket shop, especially at the busiest times of the year," King said.Groceries online was up 10% during the quarter, and December 22nd was the strongest ever sales day, reaching over £5m. During the period the company launched a new groceries online website to allow easier navigation of items. The group also introduced an online delivery pass, which more than 10,000 customers have already purchased. The general merchandise and clothing business achieved record levels of market share, driven by tablewear, gifting, Christmas jumpers and onesies. The firm added six new supermarkets, four extensions, and 19 convenience stores in the third quarter.Sainsbury continued to improve existing stores, refurbishing five supermarkets and 11 convenience stores in the quarter. The group said it is on track to deliver its target of around a million square feet of new space by the end of the year.Panmure Gordon maintained its 'hold' rating following the results, saying it believes the supermarket is the best placed of the UK food retailers and its third quarter trading statement was "encouragingly towards the upper end of market expectations".The stock trades at 11.3 times earnings and offers a 4.7% dividend yield which the broker admits isn't particularly demanding."It is our favourite of the three grocery stocks [Sainsbury, Tesco and Morrison], although our caution on the short-term sector outlook as a whole holds us back from having a more positive recommendation at the moment."RD