Sainsbury’s reports higher sales but warns bank profits will take a hit this year

Supermarket is ahead of targets for opening new Argos stores

Sainsbury’s grew sales and profits last year, while reducing debt by £113m, helped by a record performance over the Christmas period.

The group posted a 9 per cent increase in sales for the 52 weeks to 10 March, from £29.1bn in 2016/17 to £31.7bn. Underlying pre-tax profit was up 1.4 per cent to £589m from £581m, and basic earnings per share fell by 6.4 per cent to 20.4p from 21.8p.

“These are respectable growth levels in a difficult retail environment,” said David Madden, market analyst at CMC Markets.

Sainsbury’s, which is currently pursuing a merger with Asda, said it has opened 191 Argos stores in its supermarkets, which will allow it to beat its target of 250 opened by March 2019. The group bought Argos in 2016, and CEO Mike Coupe said on Monday that Argos “synergies” had helped drive profit growth.

“We are focused on making Sainsbury's a destination of choice. We are clearly differentiated by the quality of our food and we have recently invested a further £150m to lower prices,” he said.

“General merchandise and clothing are both performing ahead of the market and, in response to great customer feedback and financial returns, we are opening Argos stores in our supermarkets faster than we originally planned.”

Meanwhile, profits at Sainsbury’s Bank grew to £69m, but the group warned that this is expected to “reduce significantly” in the year ahead, due to pressure from a competitive market, new accounting standards, and interest payments on capital raised in November.

However, Sainsbury’s said it continues to expect pre-tax profit of £629m in the 2018/19 financial year.