Sainsbury's put in the shade by takeover target Asda's sales growth

Asda, the British supermarket arm of Walmart, recorded its strongest sales growth in more than five years over the last quarter, while Sainsbury’s, which has agreed to buy its smaller rival, was the laggard, industry data showed on Tuesday.

Sainsbury’s, Britain’s second largest supermarket group, sealed a £7.3 billion takeover of Asda, the number three, in April, a combination that will overtake Tesco as Britain’s biggest grocery chain.

The deal is currently being probed by Britain’s regulator, the Competition and Markets Authority, and if approved is not expected to complete until the second half of 2019.

Asda’s sales rose 3.7 percent over the 12 weeks to July 15, market researcher Kantar Worldpanel said, making it the best performing of Britain’s big four supermarket groups for the first time since December 2014.

In contrast Sainsbury’s sales rose 0.8 percent, Tesco’s sales rose 2.3 percent and they were up 2.9 percent at No. 4 Morrisons.

Shares in Sainsbury’s were down 0.4 percent at 0915 GMT, while shares in Tesco and Morrisons were up 0.3 percent and 0.5 percent respectively.

Earlier this month Sainsbury’s reported slowing sales growth for its fiscal first quarter, blaming it on price cuts rather than any disruption caused by the Asda deal.

Asda, which has reported four straight quarters of underlying sales growth, is due to update on second quarter trading on August 16.

OWN BRAND BOOST

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said Asda was buoyed by a sales increase of 9 percent from its core, standard own-label lines which make up 40 percent of its sales.

The market researcher said Asda and Morrisons held their market shares, while Tesco and Sainsbury’s lost share to the discounters Aldi and Lidl, whose sales rose 10.9 percent and 9.7 percent respectively.

“Aldi and Lidl are now on the verge of hitting a combined market share of 13 percent for the first time, though the speculation over new entrants to the discount market could mean new pressures on the two retailers,” said McKevitt in reference to a media report that Tesco is close to launching a chain of discount stores in the UK called “Jack’s” by converting up to 60 existing outlets.

Total UK grocery sales rose 3.7 percent, the fastest rate of growth this year, boosted by Britain’s sunny weather and the soccer World Cup. Alcohol was the stand-out seller.

Grocery inflation was 1.8 percent for the 12 week period, Kantar Worldpanel said, noting prices rose fastest in markets such as butter, colas and canned fish.