Sainsbury's says it is ahead of rivals despite sales slowdown

Sainsbury's provided further evidence of how low food inflation and spiralling petrol prices are constraining sales growth in the grocery sector yesterday, but the UK's third-biggest grocer insisted it was growing ahead of its big rivals.

Justin King, the chief executive of Sainsbury's, said: "Fuel is showing significant inflation year on year. It is fuel more than anything that is putting pressure on the weekly household budgets and that is expected for some time to come."

For the first quarter to 12 June, Sainsbury's posted like-for-like sales, excluding petrol and including VAT, up by 1.1 per cent, its weakest figures for five-and-a-half years. The grocer said over the past two years its Q1 underlying sales were up by 8.2 per cent and it had delivered 22 consecutive quarters of growth.

Mr King said: "We are continuing to lead the pack." But excluding the impact of VAT, Sainsbury's underlying sales only grew by about 0.3 per cent. On Tuesday, Tesco delivered UK like-for-like sales up by just 0.1 per cent in its first quarter, Morrisons grew its underlying sales by 0.8 per cent and Asda's sales fell by 0.3 per cent.

Sainsbury's will add 1.45 million sq ft of new space, including 20 new supermarkets, more than 20 extensions and between 75 and 100 convenience stores in 2010/11. Total sales, including petrol and new space, grew by 7.6 per cent in the first quarter.

Somewhat cheekily, Mr King said the recent boardroom changes unveiled at its biggest three rivals could benefit Sainsbury's. Last week, Tesco said that Philip Clarke, its head of international, would take over as chief executive from Sir Terry Leahy next March. This spring, Dalton Philips started as chief executive at Morrisons and Andy Clarke took the top job at Asda.

Mr King said: "It can't be unhelpful to have change at the top amongst our competitors... we hope it causes them to break their stride and if it does we will keep making sure we are doing a great job and that will help us a little bit."