Sainsbury's growth slowdown shows High Street pain

Evidence of just how tough it has been for retailers since Christmas arrived today in the form of slowing sales growth at Sainsbury's.

The UK's third-biggest supermarket, whose ad campaign is fronted by celebrity chef Jamie Oliver, has been booming for several years under the leadership of Justin King.

Today it said fourth-quarter sales rose just 1% excluding fuel and new store space. That was sharply down on the previous three months' 3.6% growth, and worse than the City expected.

This caused more than one analyst to advocate dumping the shares and buying Morrisons instead.

Supermarkets normally thrive when economic conditions are tough. If even they are struggling, it suggests other retailers are having a miserable time.

King says consumers need reassuring that the worst of the slump is over. "The Chancellor needs to convince people that the majority of the pain was last year," he said.

King reckons the cautious consumer behaviour which began with the financial crisis in 2007 has persisted ever since, with any potential extra spending disappearing into fuel tanks.

"Petrol is putting particular pressure on people," he said.

Over the year, sales are up 2.3% excluding fuel.
The shares fell 18.5p to 335.9p.

Nick Bubb at Arden Partners said of the stock: "We would switch to Morrisons... which has identified £300 million of cost savings to support its profit growth and has exciting ideas to drive better, top-line growth."

Freddie George at Seymour Pierce said: "We reiterate our sell recommendation and believe Sainsbury's premium valuation is unjustified."

Sainsbury's is expected to make a full-year profit of £655 million.