Sainsbury Q4 misses forecast as shoppers squeezed

J Sainsbury, Britain's third-biggest supermarket group, missed fourth-quarter sales forecasts, adding to signs of a slowdown in consumer spending growth as inflation climbs and government spending cuts bite.
Sainsbury, which trails industry leader Tesco and Wal-Mart's Asda in annual sales, said on Wednesday sales at stores open over a year rose 1 percent, excluding fuel but including VAT sales tax, in the 10 weeks to March 19.
That was a slowdown from 3.6% growth in the previous quarter and compared with a forecast for 2.4%.
"We expect the consumer environment to remain tough, with our customers facing fuel price inflation, uncertain employment prospects and government spending cuts," Sainsbury said.
A procession of British retailers have said trading conditions have got harder since Christmas, as the government embarks on an austerity drive aimed at slashing its deficit and following an increase in VAT sales tax.
Finance minister George Osborne will be under pressure to show in his budget on Wednesday that the fiscal squeeze is not taking too much of a toll on growth prospects.
Sainsbury has been growing sales faster than most of its rivals for several quarters, helped by strength in the more affluent south of England as well as an expansion into online and convenience shopping and non-food ranges like clothing.
The group said its fourth-quarter performance was ahead of the broader grocery markst and non-food sales were growing at three times the rate of food.
Total sales, including fuel and new selling space, were up 6.8% in the quarter.
Sainsbury shares have outperformed the STOXX Europe 600 retail index by 15% over the past year. They closed at 354.3 pence on Tuesday, valuing the business at about 6.5 bln pounds ($10.6 bln).