J Sainsbury PLC (SBRY.LN) is at the forefront of a consumer shift towards one-stop shopping that has helped the group steal a march on its supermarket rivals this Christmas.

The company overtook Wal Mart Stores Inc. (WMT)-owned Asda to take the number two supermarket spot by market share in the U.K. for the first time in seven years according to four-week data by Kantar Worldpanel released Tuesday, although Asda will undoubtedly reclaim second place when it gets the go-ahead to acquire the Netto grocery chain.

Still, Sainsbury crowned its market share achievement by reporting strong third quarter sales growth Wednesday that is widely expected to be the best among the big four grocers. Tesco PLC (TSCO) reports Thursday and Asda will update the market in February.

In a trading update for the 14 weeks to Jan. 8, the company said total sales rose 7.5%, well ahead of consensus expectations for a rise of 5.5%, with same-store sales up 3.6% compared with market expectations of 3% including Value Added Tax but excluding fuel.

The cornerstone of Sainsbury's same-store sales outperformance, which is almost 2% better than smaller rival Wm Morrison Supermarket PLC (MRW.LN) which reported Monday, is its expansion into non-food sales.

Sainsbury is rapidly expanding its stores as it builds non-food areas to add onto its grocery departments. While new stores don't count towards like-for-like sales until they have been open a year, store extensions do.

Jefferies analyst James Griznic estimates the store extensions are adding around 1% to the group's same-store sales, the key industry benchmark for growth.

And this addition of non-food, which counts Sainsbury's TU clothing brand, electricals, entertainment and home lifestyle products in its stable, has tapped into a shift by consumers towards one-stop shopping.

"The convenience of buying non-food whilst buying food is a long term trend, and one we're driving with our store development program," Chief Executive Justin King said Wednesday.

This trend was reflected in the pace of non-food sales growth, which continued to grow at three times the rate of food in the period.

Some of this growth will have come at the expense of high street stores, many of which have reported a slump in Christmas sales because of the severe weather.

Several victims of the cold snap, including HMV Group PLC (HMV.LN), Mothercare PLC (MTC.LN) and Clinton Cards (CC.LN), have issued profit warnings, in stark contrast with Sainsbury which reported very strong sales in entertainment and clothing.

Kantar communications director Edward Garner said its supermarket sales figures suggested the snow meant shoppers only ventured out for essential groceries, but once at the supermarket added non-food items like DVDs, toys and books to their basket instead of going to high-street stores.

King agreed that grocers clearly got the best of the [snow], but also pointed out that some "did a better job than others."

"In the weeks before Christmas we used 12,000 tons of salt, up from 750 tons the year before," King said, adding "you didn't need to be a victim of the snow if you prepared well enough."

At 0955 GMT, Sainsbury shares were down 1.3% or 5 pence at 385 pence in a slightly higher London market. Sainsbury shares have risen around 17% in the last year, outperforming the market as it grew ahead of its rivals and gained market share. Still, the shares now trade at around a 17% premium to the sector, prompting a general market view that the shares are relatively expensive and may suffer some profit taking in the short term.

By Kathy Gordon, Dow Jones Newswires; 44-207-842-9293; kathy.gordon@dowjones.com

 
 
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