Sainsbury 8217 s keeps pressure on Tesco with 0 2 sales growth in Q3

Sainsbury’s reported like-for-like sales for the third quarter trading period grew by 0.2% (flat), beating market forecasts for a 0.5% decline in sales and keeping the pressure on Tesco, who reports their own numbers tomorrow.

This is Sainsbury’s 36^th consecutive quarter of sales growth, a remarkable achievement against a backdrop of increasingly challenging competition for lower end retailers such as Aldi and Lidl who continue to take market share from the biggest players. Sainsbury’s is now the number two retailer in the UK, behind Tesco, with Asda closely behind in the number 3 spot.

Total sales excluding fuel grew by 2.7%, with a very challenging October and November helped by a strong Christmas period. This paints a picture that Sainsbury’s may have seen its shoppers look elsewhere for better discounts and offers in the run up to December but returned to their ‘home’ shops for the Christmas period; potentially threatening any market share that Tesco may have attracted in the run up to December with its aggressive price campaign. However, Sainsbury’s maintains that the challenging October and November period was characterised by families saving up to treat themselves over Christmas.

Nevertheless, this is yet again another solid report which will keep shareholder confidence alive in what has fast become one of the most aggressive and challenging retail environments – groceries. The company’s share price has fallen away somewhat from resistance above the 400p level, which continues to be a popular selling level for buyers and this is putting a cap on the ability of the stock to push higher in the long term. Shares have fallen some 14% since mid-November as investors looked to lock in their gains for the year but have found support at the 360p level in the last week.

Pressure is on Tesco

This result keeps the pressure on Tesco, who report their own numbers for the Christmas trading period tomorrow.

Tesco is under significant pressure from shareholders, having seen its small turnaround momentum slow in the last two quarters with continued sales declines.

The market is expecting Tesco to report a like-for-like sales decline of 1.5% when they report at 7am on Thursday. With Sainsbury’s reporting slightly better numbers than forecast and indeed another quarterly profit growth, Tesco really needs to deliver. The Christmas trading period is the biggest period for any retailer and a failure of Tesco to attract sales will continue to eat away at shareholder confidence and could raise questions over the solidity of senior management positions.

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