British supermarket giant Sainsbury is more likely to focus on growing its business in the south of England rather than expanding its operations in Northern Ireland, industry analysts have warned. The UK's second-largest food retailer has just seven stores in the North compared to British rival Tesco, which has 36 stores, and Safeway, which currently has 12. First-quarter trading figures for the group show like-for-like sales growth of 6 per cent, with total sales up 8.6 per cent in the UK. It has not disclosed its most recent trading performance in Northern Ireland.
The group has said it believes its stores in the North have now recovered from the impact that the foot-and-mouth crisis had on the retail sector in Northern Ireland earlier this year.
Sainsbury wants to achieve costs savings of £150 million sterling across its operations this year and has also outlined a major refurbishment and extension programme for its stores in Britain. According to analysts at HSBC Investment Bank, Northern Ireland is unlikely to be a "huge focus" for the supermarket giant going forward.
"Sainsbury's has been moving away from being a big national brand chain towards a more niche foodie market. It wants to focus on its existing customer base rather than trying to win new customers. Far-reach stores are likely to become less and less significant in this strategy," according to HSBC analysts.
Analysts view Sainsbury's seven Northern Ireland stores as an expensive portfolio. "Sainsbury's needs to have critical mass, it becomes expensive and difficult to maintain seven stores on a far-reach basis.
"We would expect Sainsbury's to focus on its domestic business, particularly in the south of England where its main customer base is and it is unlikely to focus on extending its base elsewhere," HSBC analysts said.
Although Sainsbury has hailed its flagship store in Northern Ireland, at Forestside Shopping Centre in Belfast, as one of its top performing stores in the UK, industry sources in Northern Ireland say the remaining six stores do not come near to matching its turnover. The group estimates that on average 150,000 people shop in its Northern Ireland stores, which employ more than 1,700 people, each week.
However, the current size of the group's operation in Northern Ireland means that it is unlikely to deliver any serious growth opportunities for Sainsbury, compared to the penetration of its major UK rival, Tesco, in Northern Ireland.
Sainsbury was previously the largest British supermarket group but is now joint second on market share with Asda behind Tesco.
Although Asda is believed to have explored the opportunity of expanding into the North, it has shown no signs to date of entering the highly competitive retail environment.
Safeway has also found it difficult to compete with Tesco in Northern Ireland because of the group's size in the local market. Tesco first entered the market in the North in 1997 with the £630 million acquisition of the former Stewarts/Crazy Price group.
