Sainsbury has announced a 4.1% rise in underlying sales for the 12 weeks to March 22. As well as reporting a 13th consecutive quarter of like-for-like growth, Sainsbury has entered into a property joint venture with British Land, paving the way for redevelopment at the majority of the 39 stores included in the deal.

Sainsbury has continued to achieve credible total and like-for-like sales rises, announcing an increase in like-for-like sales for the 13th consecutive quarter. Sales have been driven by increased transaction numbers and higher average transaction sizes. Price inflation, at 2.1% during the last quarter, was also important here, with food volumes only marginally positive.

Building on this string of successes, Sainsbury is also bullish in its outlook for 2008. Although it has acknowledged that times are tough for consumers as the cost of living rises, the company stated its confidence that consumers will continue to spend more in areas where quality is important to them. Speaking about the year ahead, chief executive Justin King said that the firm had seen no evidence that consumers are trading down to lower priced products in order to save money.

Non-food retail remains a key area of growth for Sainsbury and is currently growing three times as quickly as its food business. Strong sales of its own brand TU clothing label, large electricals items and entertainment have spearheaded this growth. Indeed, non-food now accounts for 15% of the business, up from around 10% in 2000. The retailer continues to redevelop stores, flexing non-food space upwards where it can do so without negatively impacting upon its core food ranges.

The retailer has also announced a GBP1.2 billion property joint venture with British Land, through which 39 large stores will be jointly owned and developed. Verdict Research expects a high proportion of the new space arising from these store developments to be allocated to non-food product categories in the future. Further tweaks to the ownership structure of Sainsbury’s stores are likely as it continues to leverage these assets.

Sainsbury is confident that the slowdown in the economy will only have a limited impact upon its performance, and it will now concentrate on changes to its non-food offer and its store portfolio to create increased shareholder value. However, with inflation a key driver of growth, boosting food volumes against a tough economic backdrop will continue to be challenging.

Related Research: UK Grocery Retailers 2008