Sainsburys sales expansion is slowest in five years (contains video)

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J Sainsbury today revealed its slowest quarterly sales growth for nearly five years, after being hit by slowing food price inflation, and predicted a tough year ahead.

Comparable sales in the three months to March 20 slowed to 1.7 per cent, compared with growth of 3.7 per cent in the third quarter of the year, 5.7 per cent in the second quarter and 7 per cent in the first. The store chain has not seen slower growth since the first quarter of its 2005 financial year.

Justin King, the chief executive of Sainsbury"s, said that the fourth-quarter figures represented another "good performance in line with our expectations on top of strong growth last year".

However, he warned: "We expect the consumer environment to remain challenging in 2010."

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Mr King said: "For much of the last few years, growth for us and the industry was driven by inflation." He said that inflation for fresh food was now just "a little bit above nought".

Nearly all the growth in the fourth quarter came from sales of general merchandise, rather than food, with non-food sales growing three times as quickly as food trade. Children"s clothing and womenswear were performing well, Mr King said.

Including sales from Sainsbury"s petrol stations, which benefited from the rising price of petrol, like-for-like sales in the three months grew by 4.8 per cent.

Mr King said that the chain was winning market share. The number of weekly customer transactions had grown by one million to 19 million year on year as customers visit the stores more often or spend more while they are there. The grocer is forging ahead with its store expansion programme, having added 6.8 per cent extra space in the year, largely through extending existing stores.

Total sales, excluding fuel, rose by 6.3 per cent on the year.

The supermarket also relaunched its Freefrom brand of foods for those with low wheat or gluten tolerance and its Be Good To Yourself foods, which encourage balanced healthy eating.

Sainsbury"s shares rose 1.1p to 229.4p.