Sainsbury’s hikes profit guidance as it wins back shoppers from discounters
The supermarket said full-year profits are now expected in the ‘upper half’ of its guidance as efforts to keep food prices low boosted grocery sales.
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Your support makes all the difference.Supermarket Sainsbury’s has upped its annual earnings outlook as it said it was claiming market share from German discounters Aldi and Lidl thanks to soaring grocery sales.
The UK’s second biggest grocery chain said full-year underlying pre-tax profits are now expected to be in the “upper half” of its guidance, at between £670 million and £700 million, as efforts to keep food prices low boosted sales.
Total grocery sales jumped 8.9% in the second quarter and were 10.1% higher over the first half.
The firm, which also owns retailer Argos, said the sales hike was not just driven by price rises, with shoppers also buying more items as it focused on keeping food costs down for cash-strapped customers.
Food is firmly back at the heart of Sainsbury’s
Chief executive Simon Roberts said the group’s food price inflation was running at half the level reported by the Office for National Statistics, with price cuts in some areas such as fresh food.
It is also leading a Nectar price campaign, helping to bring down costs for members of its loyalty scheme, in particular branded goods.
The group said its focus on food was paying off, claiming it was the only big supermarket chain winning back customers from the likes of Aldi and Lidl, which have been gaining share amid the cost of living crisis.
It added it was gaining record market share gains and winning sales by volume from every supermarket competitor.
Mr Roberts said: “Food is firmly back at the heart of Sainsbury’s.”
He added: “We know people are still finding things tough and we’re working harder than ever to reduce our costs, putting the money back into our customers’ pockets through lower prices on the products they buy most often.
“I’m pleased to say food inflation is coming down and we are passing savings on to customers.”
Looking ahead to the all-important Christmas season, the group said the “strong trading momentum has continued in recent weeks and we are confident heading into the peak trading period”.
Shares in the group lifted more than 5% on Thursday morning after the rosier outlook for profits.
It previously guided for annual profits of £640 million to £700 million, having delivered £690 million in 2022-23.
But the firm reported a slowdown in retail sales growth in the second quarter, at 6.6% on a like-for-like basis, excluding fuel, down from 9.8% in the first three months, as the grocery performance was offset by a difficult performance for its clothing range and general merchandise arm.
Clothing sales plunged 14.6% in the second quarter as a cooler summer and warm early autumn affected demand for seasonal clothing ranges.
General merchandise sales were 2.6% lower in the second quarter, but this was pared back to a decline of 0.6% when stripping out the hit from the closure of Argos in Ireland.
It held underlying pre-tax profits firm at £340 million in the six months to September 16 in the face of rising costs and intense competition on prices across the sector.
On a statutory basis, pre-tax profits fell 27% to £275 million from £376 million a year ago, when results were buoyed by income from a legal settlement.
Mr Roberts said the group was seeing customers choose to stay at home for nights in with the family and treat themselves by trading up on food purchases.
But he added that the sector was still battling with high levels of shop lifting , adding that retail crime and the safety of its staff and customers was the “number one issue for us”.
“The first report I look at every morning and when I look at what happened yesterday are the reports of serious incidents,” Mr Roberts said.