Last week’s ONS retail figures revealed food sales volume down 0.1 per cent in September – the biggest fall in 22 years as rising prices and recessionary fears prompted shoppers to watch every penny. The scale of the decline is brought into focus when you consider that growth has averaged 2.7 per cent in the past couple of decades.
The mantra that food stocks are defensive because everybody has to eat has helped grocers’ share price performance compared with the FTSE generally.
Of the three quoted supermarket groups, Sainsbury’s has lost most value in the past three months. That’s partly because of tycoon Robert Tchenguiz’s stock disposal and diminishing bid speculation.
It’s also because Sainsbury’s is perceived as being at risk from shoppers’ rush to the hard discounters because of its upmarket image, while Asda, Morrisons and Tesco are leveraging their value credentials.
But Sainsbury’s, which posts interims on November 12, may well weather the trading storm much better than pessimists fear.
Earlier this month, Sainsbury’s boss Justin King impressed with a 4.3 per cent second-quarter like-for-like advance. Despite the gloomy economic headlines since, there is little reason to think that he cannot keep up the pace.
Sainsbury’s should benefit from two trends at opposite ends of the retailing scale.
At the top, upscale shoppers are unlikely to leapfrog straight to Aldi or Lidl as they rein in their spending at Waitrose and Marks & Spencer. They are more likely to fill their trolleys at Sainsbury’s, confident of its quality credentials but still expecting to save a few bob.
At the bottom end, Sainsbury’s has done well in communicating the keen value to be had in its stores without diluting its reputation for high standards.
The grocer has successfully promoted its own-brand and Basics ranges with its Switch and Save campaign and deals are effectively highlighted in-store. The Feed your Family for a Fiver initiative taps into the present demand for value as well as the already established trend towards cooking.
Justin King has cleared pretty much all of the cynics’ hurdles since taking the helm to revive the business. He looks well-placed to confound the critics and prove that Sainsbury’s shares, like its food, are not past the sell-by date.
George MacDonald is deputy editor of Retail Week