UPDATE: Sainsbury Sales Growth Slows In Line With Forecasts

16th Jun 2010 07:51

(Adds detail.) By Simon Zekaria Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. grocer J Sainsbury PLC (SBRY.LN) Wednesday reported slowing sales growth in the first quarter, but said it is trading in line with forecasts and is well-placed to make good progress in a challenging environment. "We have made a good start to the financial year in line with our expectations," Chief Executive Justin King said in a statement. Sainsbury--the third largest U.K. supermarket chain by sales behind Tesco PLC (TSCO.LN) and Wal-Mart Stores Inc.'s (WMT) Asda Group Ltd.--posted a 1.1% year-on-year rise in sales from stores open at least a year, excluding fuel, for the 12 weeks to June 12. This compares with a 7.8% year-on-year rise, excluding fuel and value-added tax, last year. Rival Tesco also reported slowing first-quarter same-store U.K. sales Tuesday, up 0.1% excluding fuel and adjusted for VAT. Sainsbury's update is slightly disappointing given the two extra weeks of trading it enjoyed compared with Tesco before the start of the soccer World Cup, an analyst said. Falling food inflation has hit the top line of U.K. supermarkets since the start of the year. Economists also fear that consumer spending and confidence in 2010 will come under pressure from rising fuel prices, as well as forecasted tax hikes, public spending cuts and unemployment as the coalition government reins in borrowing. Last month, Asda posted a 0.3% fall in first-quarter same-store sales excluding fuel and VAT while William Morrison Supermarkets PLC (MRW.LN), the U.K.'s fourth-largest retailer, said it is planning for flat inflation this year as it booked a 0.8% rise in sales. Sainsbury's total sales, excluding fuel, rose 4.4% in the quarter, compared with a 7.6% rise a year earlier. The group said it is on track to increase its store space by 1.45 million square feet this fiscal year. Online grocery sales are growing by just under 20%, non-food is performing strongly and the World Cup range is selling well, the company said. In May, Sainsbury more than doubled its fiscal year net profit on higher sales. Sainsbury shares closed Tuesday at 324 pence, valuing the company at GBP6.03 billion. By Simon Zekaria, Dow Jones Newswires; +44 207 842-9410; [email protected] (END) Dow Jones Newswires June 16, 2010 02:51 ET (06:51 GMT)