Sainsbury’s improves its earnings outlook for the year

Sainsbury’s has raised its annual profit forecast despite declining sales during the crucial Christmas season.

Total retail sales on an annual basis were 2.9% lower than a year ago, but food and beverage sales edged up 0.1% in the six weeks leading up to the January 8.

The group said food and drink sales had been boosted by its efforts to keep prices lower for customers, which included a match of around 150 prices with Aldi in its “price match” campaign.

Sales of its “Taste the Difference” lines have proven popular with shoppers keen to stock up on festive food and champagne during the holiday season.

Looking ahead: Sainsbury’s raised its annual profit forecast despite declining sales during crucial Christmas season

The supermarket’s online grocery sales fell 15% year-on-year over the holiday season as demand for deliveries fell.

Sainsbury’s has said it now expects to post a pre-tax profit of at least £ 720million for the year through March, around 9% more than expected.

Like-for-like sales of the Sainsbury’s group, excluding fuel, fell 4.5% in the third quarter to Jan. 8 year-on-year, after falling 1.4% in the second quarter.

But, the UK’s second-largest supermarket chain by market share reported grocery-led sales growth for the holiday season spanning six weeks through January 8 compared to the same pre -pandemic in 2019/20.

Sainsbury’s has said it is on track to beat its profit targets through better than expected food and drink sales as the rise of the Omicron variant has boosted supermarkets.

He said recent grocery sales volumes and cost savings across the business had offset the impact of “higher operating cost inflation” and investment in the business. .

The grocer said total sales, excluding fuel, were down 5.3% for the most recent quarter as of Jan.8 from the same period last year, but were 1.4% ahead of the levels of ‘before the pandemic.

Grocery trade fell 1.1% from the same period last year, but was 6.6% above pre-pandemic levels in the last quarter.

Sainsbury’s said sales of its general merchandise business, which includes Argos, fell 16% in the quarter ended Jan.8.

But, he said, cost reductions at Argos, driven by the group’s decision to close the brand’s 420 branches, have helped bolster its profit margins.

And after?  Sainsbury's has said it now expects to post a pre-tax profit of at least £ 720million for the year through March

And after? Sainsbury’s has said it now expects to post a pre-tax profit of at least £ 720million for the year through March

Simon Roberts, Managing Director of Sainsbury’s, said: “I am really delighted with the way we have delivered to customers this Christmas.

“More people were eating at home and our significant investment in value, innovation and service resulted in market share growth.

“At the same time, we are delighted to increase our profit forecast for the full year.

“The backdrop was tough and our teams worked hard throughout the year to make sure we had all the products everyone wanted.

“Our suppliers did a great job under difficult conditions throughout the quarter and I thank them for all of their support to our business. “

The supermarket chain launched more than 600 new products in the third quarter, including 300 Christmas products.

The grocer said: “The new Taste the Difference products in party dishes, desserts, wines and spirits were very popular and we had record sales of champagne and sparkling wines. Taste the Difference was our fastest growing product line with two-year sales up 13% over the main Christmas weeks. ‘

Sainsbury’s is set to become the last UK supermarket to pay shop workers at least £ 10 an hour.

Last week he announced plans to increase his base rate of pay from £ 9.50 to £ 10 an hour for staff at his Argos supermarkets and stores from March 6.

Sainsbury’s boss Roberts said the pay rise reflected progress on his savings plan.

This follows Morrisons, Lidl and Aldi who announced similar measures last year.

Breathtaking: On Tuesday it emerged that Marks & Spencer was the fastest growing food retailer in the UK as Christmas approached

Breathtaking: On Tuesday it emerged that Marks & Spencer was the fastest growing food retailer in the UK as Christmas approached

Commenting on today’s results, Richard Hunter, Head of Markets at Interactive Investor, said: “Overall, Sainsbury can get the benefit of the doubt. Structural cost savings and better than expected grocery volumes resulted in an upgrade of the pre-tax profit forecast for the full year to a figure of £ 720million from the previously estimated £ 660million.

“The earnings upgrade confirms what has been a relatively strong price performance, with stocks rising 15% in the past year, compared to an 11% rise for the larger FTSE100. It remains to be seen whether the improved outlook is enough to improve the market consensus on equities, which is currently stuck.

Richard Lim, Managing Director of Retail Economics, said: “These are very encouraging numbers, describing a provocative consumer who has prioritized Christmas meetings despite growing concerns about the virus. Food sales held up well compared to the previous year (given the restrictions in 2020) as more family reunions took place and consumers indulged in premium ranges.

“To ensure a Covid-free Christmas, many people have limited their social interactions as the big day approaches, boosting home-cooked meals to the detriment of the hospitality industry. This shift in spending by bars, restaurants and pubs supported food sales during the period.

“The retailer was also in a much better position to deal with the surge in online grocery sales, having invested heavily in increasing capacity and improving efficiency over the past two years. A wave of new online grocery shoppers nearly doubled sales from 2019 levels. ‘

Shares of Sainsbury’s, listed on the FTSE 100, are on the rise today and are currently up 2.36% or 6.60 pence to 285.90 pence. A year ago, the share price was 235.20 pence.

On Tuesday, it emerged that Marks & Spencer was the fastest growing food retailer in the UK as Christmas approached as shoppers returned to Main Street after last year’s lockdown, according to a report independent.

The brick-and-mortar retailer, which lost in 2020 because most of its stores are located on shopping streets or in travel centers affected by the closures, overtook discounters Aldi and Lidl with sales growth of more than 9% in the 12 weeks until December 26.

The figures were provided by analysts at NielsenIQ and based on a survey of more than 14,500 households. M&S didn’t start selling food online, through Ocado, until August 2020.

Lidl, which hardly sells food online, was the next fastest growing retailer at 8.5% in the three months, with eight new stores opening in December. Aldi, who had claimed to be the UK’s best player heading into Christmas, was next with 4.8%, helped by more store openings.

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