J Sainsbury Plc (SBRY), the U.K.’s third- largest supermarket owner, reported fourth-quarter sales growth that beat estimates as the Taste the Difference food range helped the retailer close the gap on market leader Tesco Plc.
Revenue at stores open at least a year rose 2.6 percent in the 10 weeks ended March 17, the London-based company said today in a statement. The growth, reported on a basis which includes value-added tax and excludes gasoline, outpaced the 2.2 percent median estimate of six analysts surveyed by Bloomberg News. Sainsbury is among supermarkets making inroads into the market leadership of Tesco, which is ramping up investment in customer service after sales growth slowed to almost half that of the industry. Sainsbury increased its share of U.K. grocery spending to 16.6 percent in the 12 weeks ended Feb. 19, according to Kantar Worldpanel, while Tesco (TSCO)’s share declined to 29.7 percent, the lowest in almost seven years.
“Sainsbury is still hitting the right notes with its marketing and advertising and are entitled to be confident of standing up to whatever Tesco will throw at them,” Nick Bubb, an independent retail analyst, said in an e-mailed note.
Sainsbury rose as much as 2.4 percent in London trading and was up 2.1 percent at 311.7 pence at 8:18 a.m.
Taste The Difference
Sales of higher-priced Taste the Difference products increased almost 20 percent in the fourth quarter, the company said. The range includes items such as Cornish clotted cream scones and smoked salmon and watercress quiche.
Customers also increased purchases of Sainsbury’s Basics own-label foods to save money as household incomes dwindle. Sales of the range increased 10 percent in the quarter.
“The economic climate is likely to remain challenging, and we are committed to helping customers make their money go as far as possible,” Chief Executive Officer Justin King said in the statement.
Sainsbury said it has invested more than 85 million pounds ($135 million) this year to improve its fresh food offer.
“It’s very important to get the quality right and the service right,” Chief Financial Officer John Rogers said in an interview. “Pricing is very important, but it’s only one of the components” to sales growth.
Sainsbury said it has become the fastest-growing online grocer, serving an average 165,000 customers a week. Its Click and Collect service, where customers order online and pick up their goods in-store, is available at almost 900 outlets and has attracted more than 50 percent of the grocer’s online customers.
Full-year same-store sales, including value-added tax and excluding fuel, rose 2.1 percent, Sainsbury said.