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UK: Sainsbury's eyes expansion in foreign markets

J Sainsbury, the supermarket, is examining opening stores in new overseas territories as its UK performance continues to be robust.

The retailer has already said that it has a team looking at opportunities in China but Darren Shapland, Sainsbury's recently-appointed development director, said on Wednesday that the retail group is also sizing up other countries.

"We are looking in general at what international can bring," he said, declining to comment of specific markets.

The move came the day after Marks & Spencer also outlined plans to step up its overseas expansion. Many UK retailers have tried and failed to operate shops overseas. Tesco, Kingfisher and Dixons Retail are the only UK store groups with sizeable wholly-owned foreign operations. About a decade ago Sainsbury's owned a chain in the US and a chain in Egypt but it exited them when its core domestic business hit hard times.

As well as looking for markets overseas, Sainsbury's will embark on a major opening programme for its small-store "convenience" division over the next six months in the UK. The retailer plans to open up to 50 convenience shops over the second half of its financial year, compared to 13 in the first half. The retailer said that opening new convenience stores is likely to be "a rich seam for many years to come".

The news came as Sainsbury's reported its first-half results. The chain said that over the six months to October 28 sales rose by 7pc to £11.9bn, or by 2pc on a like-for-like basis, which strips out new store space. Pre-tax profit over the six months increased by 8.1pc to £332m.

Justin King, chief executive, said that Sainsbury's growth is ahead of the market and that the group is gaining market share: "If anything we have been stretching our legs a little away from the market in recent months."

Mr King described Sainsbury's first half as a "continuation of a strong performance over a long period of time".

Looking to the high street's prospects for the festive season, he predicted "a fiesty Christmas. They always are. We have the VAT rise and so there might be a bit of forward purchasing".

Mr King said that the recently relaunched Taste the Difference upmarket food range had been selling well and had been boosted by people staying at home to watch The X-Factor at weekends.

Sales of Sainsbury's own-label brands account for just over 51pc of its sales. These can provide both higher margins for the chain and also lower prices for shoppers.

"If you have 5pc more own-label [sales] in the mix it is equal to giving customers a 1.5pc price cut," he said.

He said that Halloween was "huge" for the chain. "We did better than we envisaged. We've not yet found the limit of what Halloween is," he said. The retailer said that its property portfolio is now worth £10.2bn, up £400m from last year. Sainsbury's increased its interim dividend by 7.5pc to 4.3p. It will be paid on January 7.


Publication date: 11/12/2010


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