Sainsbury Sales Top Forecast Thanks to 'Comic Relief'

J Sainsbury, Britain's third-biggest grocer, beat forecasts with its biggest quarterly underlying sales rise for 2-1/2 years, helped by its participation in the Comic Relief charity day on March 13.

Sharon Lorimer

The 140-year-old firm, with more than 500 supermarkets and over 275 convenience stores, said on Wednesday sales at shops open at least a year rose 6.2 percent, excluding fuel, in the 11 weeks to March 21, up from 4.5 percent in the third quarter.

Forecasts ranged from 4.7 percent to 5.8 percent, with an average of 5.5 percent, in a Reuters poll of eight analysts.

"A fabulous performance," said Shore Capital analyst Clive Black, raising his full-year profit forecast to 540 million pounds ($792 million) from 524 million.

Sainsbury, the biggest corporate partner for Comic Relief, estimated the event boosted sales by 0.3 percentage points and helped it to attract over 19 million customers that week, its highest number of weekly transactions outside of Christmas.

Adjusted for the recent, temporary reduction in value-added sales tax, underlying sales rose 7 percent, the firm said. 

Sainsbury has defied predictions it would suffer in the economic downturn from its mid-market positioning, taking custom from upmarket rivals like Marks & Spencer while holding onto cash-strapped shoppers with innovative campaigns like "feed your family for a fiver" and "love your leftovers." 

The firm said its "switch and save" campaign, which urges shoppers to buy cheaper own-brand goods, had helped to lift sales of its "basics" range over 60 percent on the year.

"We expect the current economic environment to remain challenging but our focus on delivering universal appeal through great products at fair prices means we are well positioned to continue our good progress," it said in a statement. 

Sainsbury's growth has outstripped market leader Tesco, which posted a 2.5 percent rise in underlying sales for the seven weeks to Jan. 10, though it has lagged closest rivals Asda and Morrison.

Sainsbury shares have outperformed the DJ Stoxx European retail index by 20 percent over the past year and closed at 330.75 pence on Tuesday, valuing the business at about 5.6 billion pounds.

One trader said the shares were set to open 5 pence higher. 

Shore Capital's Black kept a "hold" rating on the stock, saying much of the good news was priced in. Sainsbury's shares trade at 15.8 times forecast earnings, above Morrison on 13.9 and Tesco on 11.6, according to Reuters data.

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