Till roll

29 March 2006 By John Foley Follow @johnsfoley

The UK supermarket group s core growth is bounding ahead at 5.3%. At that rate, it should overtake closest rival Asda within a year. But price cuts and cost increases mean beefing up Sainsbury s skinny margins will be tough. That makes its premium to Tesco hard to fathom.

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J Sainsbury reported likeforlike growth of 5.3%, excluding sales of petrol, in the quarter ending March 25. The UK retailer has reported five consecutive quarters of likeforlike growth. Total sales grew 6.7% in the period.

Sainsbury said it had cut the price of goods in its stores by 2.2% over the quarter, compared to 1.4% in the first half. The group has been pursuing a recovery plan including reinvesting earnings into lower prices, to attract customers back into its stores.

Sainsbury now has 16.2% of the UK's total grocery sales, according to TNS market share data released earlier this month. Closest rival Asda has 16.6%. Sainsbury hopes to close the gap by spring next year.

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