Store expansion has cost Sainsbury's more than it has gained in sales, a leading analyst claimed this week.
Speaking as the retailer announced slowing like-for like-sales, Collins Stewart analyst Greg Lawless said Sainsbury's was underperforming due to immature assets that had yet to deliver a return on investment.
"Sainsbury's is accelerating its space growth and successfully adding stimulus to its promotions with coupons at the till, but is not covering the cost of its capital expenditure (6.8% gross space growth for the full year equates to just 2.7% of sales generated from new space in Q4). It continues to lag behind Morrisons, Tesco and Waitrose," he said.
Like-for-like sales were up 1.7%, slowing from 3.7% in Q3, while total sales growth (excluding fuel) was 4.4%, down from 6.3% in the previous quarter. This is the retailer's slowest growth rate in six years and the first time it has slipped below the market in 18 months.
Concerns were also raised about how Sainsbury's reliance on promotions will affect its margins. The retailer increased its number of deals by 44.5% in the 12 months to 6 March 2010 [Assosia], more than any other retailer.
"Sainsbury's needs to build on its margins given the slowdown across the whole market," said Shore Capital's Darren Shirley.
The retailer acknowledged it has the weakest operating margin in the sector (3.3%), but drew attention to its extra one million weekly customers, store openings and aggressive couponing.
"Our universal consumer appeal, together with our accelerated growth of space, means we are well placed to make continued good progress in the new financial year," said chief executive Justin King.
"There's always an element of cut and thrust when everyone is trying to gain market share. Customers have shown they value coupons and loyalty offers by redeeming them at the tills across the country, so we'll continue to dial up our promotional mix in the next quarter."
Speaking as the retailer announced slowing like-for like-sales, Collins Stewart analyst Greg Lawless said Sainsbury's was underperforming due to immature assets that had yet to deliver a return on investment.
"Sainsbury's is accelerating its space growth and successfully adding stimulus to its promotions with coupons at the till, but is not covering the cost of its capital expenditure (6.8% gross space growth for the full year equates to just 2.7% of sales generated from new space in Q4). It continues to lag behind Morrisons, Tesco and Waitrose," he said.
Like-for-like sales were up 1.7%, slowing from 3.7% in Q3, while total sales growth (excluding fuel) was 4.4%, down from 6.3% in the previous quarter. This is the retailer's slowest growth rate in six years and the first time it has slipped below the market in 18 months.
Concerns were also raised about how Sainsbury's reliance on promotions will affect its margins. The retailer increased its number of deals by 44.5% in the 12 months to 6 March 2010 [Assosia], more than any other retailer.
"Sainsbury's needs to build on its margins given the slowdown across the whole market," said Shore Capital's Darren Shirley.
The retailer acknowledged it has the weakest operating margin in the sector (3.3%), but drew attention to its extra one million weekly customers, store openings and aggressive couponing.
"Our universal consumer appeal, together with our accelerated growth of space, means we are well placed to make continued good progress in the new financial year," said chief executive Justin King.
"There's always an element of cut and thrust when everyone is trying to gain market share. Customers have shown they value coupons and loyalty offers by redeeming them at the tills across the country, so we'll continue to dial up our promotional mix in the next quarter."
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