Supermarket giant Sainsbury’s has boosted its earnings outlook thanks to soaring grocery sales as it focused on keeping food costs down for cash-strapped customers.
The grocery chain and Argos owner said it held underlying pre-tax profits firm at £340m 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 per cent to £275m from £376m a year ago, when results were buoyed by income from a legal settlement.
We’ve published our Interim Results for the 28 weeks to 16 September 2023. Our investment in value, innovation and service has delivered the strongest market share gains since our Food First Strategy was introduced https://t.co/Y7fuwO6HBp pic.twitter.com/Hq1dFV6RUz
— Sainsbury's News (@SainsburysNews) November 2, 2023
The group reported a 6.6 per cent rise in like-for-like retail sales, excluding fuel, in its second quarter, down from growth of 9.8 per cent in the first three months, as its performance was hit by a difficult performance for its clothing range.
But it said full-year underlying pre-tax profits are now expected to be in the “upper half” of its guidance, at between £670m and £700m, as efforts to keep prices low boosted grocery sales.
It previously guided for annual profits of £640m to £700m, having delivered £690m in 2022-23.
Total grocery sales jumped 8.9 per cent in the second quarter and 10.1 per cent over the first half, according to the firm.
We’re the most competitive on price we have ever been and customers are noticing. Grocery sales are up 10.1% and we’re the only full-choice supermarket gaining customers’ spend from limited choice competitors pic.twitter.com/KyoNsMi77h
— Sainsbury's News (@SainsburysNews) November 2, 2023
Chief executive Simon 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.”
Our customers are loving Nectar Prices. From 300 products in April to over 6,000 today, the vast majority of our customers are now regularly using Nectar and saving almost £10 on a typical £80 shop pic.twitter.com/gmGklduJtC
— Sainsbury's News (@SainsburysNews) November 2, 2023
Looking ahead to the all-important Christmas season, the group said “strong trading momentum has continued in recent weeks and we are confident heading into the peak trading period”.
The half-year figures showed that the strong grocery performance was partially offset by a tough market for general merchandise and clothing, with the latter plunging 14.6 per cent in the second quarter as a cooler summer and warm early autumn affected demand for seasonal clothing ranges.
General merchandise sales were 2.6 per cent lower in the second quarter, but this was pared back to a decline of 0.6 per cent when stripping out the hit from the closure of Argos in Ireland.
