UK Markets: Sainsbury’s Sale Growth Puts Pressure on Tesco

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The news came yesterday that Sainsbury’s had some surprising results with like-for-like sales in the third quarter trading period. Sales had grown by 0.2% despite predictions that the supermarket would see a decline of 0.5%.

In an earlier blog by Joshua Raymond, he explains that this is a positive result for Sainsbury’s in a challenging market. With the 36^th consecutive quarter reporting sales growth, the chain are confidently holding their own against lower-end retailers like Aldi and Lidl, as well as market giants Tesco.

Fierce competition

Sainsbury’s appear to be in the minority of supermarket chains with positive sales figures over the Christmas period, with a 2.7% growth in supermarket sales (excluding fuel purchases). Yesterday, I had anticipated a 1.5% drop in Tesco’s like-for-like sales however the news earlier today reports a fall of 2.4% in sales over Christmas with shares falling by 4% according to the BBC.

It would certainly appear that despite Tesco running a fierce marketing campaign set to attract new customers and the likes of Lidl and Aldi offering cheaper prices, Sainsbury’s customers have remained loyal to the brand during the festive season.

Market giant

While Tesco have dominated the market for the past few years, these results are certainly a game-changer. The chain has reported strong performance on the Tesco website with a 14% rise in UK sales over Christmas.

However, the reason for the disappointing sales figures is due to poor overseas performance and the supermarket’s decision to open fewer stores in the UK. Chief executive at Tesco, Phillip Clarke told the BBC that overseas sales were down 0.7% owing to the political instability in Thailand, which has contributed to the poor performance.

Challenging market

It goes without saying that in this tough economic climate supermarkets have been aggressively competitive to keep their market share. Yorkshire-based supermarket Morrison’s reported a fall of 5.6% in sales over the Christmas period, with a depressing share fall of 7%.

While most other supermarkets have been quick to open up smaller, convenience stores as well as online shopping options for many years now, the Yorkshire-based chain have been slow to follow suit.

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“The difficult market conditions were intensified for Morrison’s by the accelerating importance of the online and convenience channels where Morrison’s is currently under-represented, and by targeted couponing which was particularly prevalent in the market this Christmas,” the supermarket has said in a statement.