Sainsbury's long-standing dominance of its middle-class London heartland is under threat as the grocer's strategy falters.
Chief executive Sir Peter Davis is under fire from shareholders and analysts as sales growth stumbles. And the latest regional figures from TNS, showing the retailer is struggling in a natural catchment, will be another concern for the board.
In London, Sainsbury's still leads Tesco, but the gap is closing. Sainsbury's has 31.1 per cent of the market, while Tesco has 29.3 per cent. But three-month implied sales growth data for the 12 weeks to 22 June show that Sainsbury's has slipped 3.8 per cent, while Tesco has grown by 2.2 per cent.
Citigroup Smith Barney analyst Dave McCarthy stated that implied sales growth in London has been falling since August last year at Sainsbury's, and is below that of Tesco, Asda, Morrisons, Safeway and Waitrose. McCarthy believes if this trend continues, it is unlikely Sainsbury's will retain its leadership in the capital.
London is vital for Sainsbury's, as sales there account for more than a third of total turnover. The grocer has lost share in eight of 10 regions over three years, and now only leads in London.
McCarthy said: 'For a company that has spent as much as it has (on refurbishing and extending stores), to have lost market share in so many regions doesn't look good.'
A spokeswoman for Sainsbury's said: 'The steps we are taking in our business transformation programme will enable us to renew our focus on driving increased sales in London and across the country.'
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