Two of the largest grocers in the UK report first half growth today but while Sainsbury’s is steaming ahead Tesco is struggling to recover real growth. Sainsbury’s has posted solid growth for the first half of its 2012/13 financial year, with total sales up 4.1 per cent and like-for-likes up 1.9 per cent.
Meanwhile, Tesco’s investment in recovering growth in its core UK business is showing signs of progress with its first positive like-for-like sales growth (growth of 0.1 per cent in the second quarter) in 18 months.
Sainsbury’s top line was bolstered by the strong performance of convenience stores and online sales, demonstrating the importance of a multichannel strategy as shopping habits change.
Brand Match is driving Sainsbury’s Live Well for Less value message home for shoppers according to Cliona Lynch, senior analyst at Verdict. “The instant coupon-at-till refund reassures Sainsbury’s shoppers that there is no need to switch away. ASA’s (Advertising standards authority) ruling on Brand Match, which relates to advertising now almost a year old and no longer in use, will not hamper the resonance of the message with customers.”
Over at Tesco the cost to the business of returning to sales growth has been high, with trading profit in the UK down 12.4 per cent. However, Philip Clarke’s decision to invest in people and stores to refresh and revive the business must be viewed as a long term commitment, so short term sacrifices on profit were expected and a necessary step in Tesco’s growth recovery.
Lynch concludes, “The challenge for Tesco is that, with coverage in every UK postcode area and a significant lead in grocery market share, it has it all to lose. Competitors have been investing for years in improving store environments, ranges and expanding their store estates to reach Tesco’s shoppers. These investments are now reaping rewards as shown by solid sales growth at Sainsbury’s and Asda. Tesco, despite its market position, is at the start of the same investment journey, and will reap rewards long term for the steps it takes now.”
Source: Verdict
