Takeover target Sainsbury’s posted higher than expected sales figures today as the supermarket chain reaped the benefits of increased revenues from Mother’s Day and Valentine’s Day.
The UK’s third largest food retailer said like-for-like sales, excluding petrol, for the 12 weeks to March 24 were up 5.9%, ahead of analysts’ predictions of between 5% and 5.5%.
The company said that sales were also lifted by taking part in Comic Relief’s Red Nose Day on March 16 – which added 0.3% to sales – increased demand for Fairtrade products, and a stronger than expected performance from new stores.
However, the update was overshadowed by speculation over a potential bid for the household name from a consortium of private equity firms and reported interest from rival chain Asda.
Sainsbury’s chief executive Justin King refused to comment on the potential bid, concentrating on the “strong momentum” of the company on its three-year recovery plan launched in 2004. Today’s figures showed the group’s ninth consecutive quarter of growth.
The private equity team of CVC Capital, Kohlberg Kravis Roberts, Blackstone Group and TPG Capital first announced it was looking into the possibility of a bid at the beginning of February. The consortium has until April 13 to make a firm offer.
Asda, the UK’s second largest supermarket chain owned by US giant Wal-Mart, has also been linked with a bid.
Sainsbury’s said that Fairtrade products were becoming an “increasingly important” part of its customers’ weekly shop and it had switched 75% of its bananas to the ethical product line.
Fairtrade sales were up 50% over the period and rocketed 150% during Fairtrade fortnight at the beginning of March.
It added that sales from new and refurbished stores had also surpassed expectations. The company has recently opened five new supermarkets, refurbished 11 and also opened five convenience stores.
However, the company’s share price was virtually unmoved by the update at lunchtime, resting around the 550p mark, which is the expected level of a potential offer for the firm.
Analysts said the bid speculation surround the firm was eclipsing the supermarket’s trading performance.
Citigroup analyst David McCarthy said: “It is the prospect of a bid which is driving the share price, not the fundamentals right now.”
Richard Hunter, head of equities at Hargreaves Lansdown added: “The figures themselves are further proof of the Sainsbury recovery story, with like-for-like sales outstripping most estimates. But the statement is completely overshadowed by the bigger picture.”