Sainsbury joins supermarket slowdown and reports sharp drop in sales

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/7833532/Sainsbury-joins-supermarket-slowdown-and-reports-sharp-drop-in-sales.html

J Sainsbury joined UK supermarket rivals Tesco and WM Morrison in reporting a sharp slowdown in sales in the second quarter amid an absence of food price inflation and higher fuel prices hitting consumer confidenc

ustin King, Sainsbury's chief executive, said he expects "low to no growth supported by low to no food price inflation" over the next two quarters.

The supermarket chain has not seen a "step on" in consumer spending since the depths of the recession at the start of 2009, he said. Shoppers are watching their spending as carefully now because of the jump in energy prices as they were when food prices were high and the economic outlook was bleak."There's been no further acceleration but nor has there been a reversal," he said.

Sainsbury's like-for-like sales rose 1.1pc excluding fuel in the three months to June 12, and climbed around 0.3pc after taking out VAT. Tesco's sales excluding VAT and fuel rose 0.1pc in the three months to the end of June, and Morrisons sales on that basis climbed 0.8pc in the first quarter.

Sainsbury's total sales rose 7.6pc in the quarter, with a 3.3pc contribution from new stores which performed better than expected. The retailer will add 1.5m square feet of new space this year, with new supermarkets, convenience stores and extensions to existing sites.

Mr King was more reserved than Tesco about the possible VAT rise in next week's emergency Budget, saying the Government must give companies at least three months notice ahead of any increase and give clear guidance on where VAT levels are likely to be in the future. The VAT cut in December 2008 was implemented with immediate effect and was "unbelievably disruptive and costly," he said.

Sainsbury shares rose 2.8 to 327.2p.

The group said it had scored a World Cup goal by ordering vuvuzela horns in advance of the competition, and expects to sell out of the 75,000 it bought this week.

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