Sainsbury’s expects ‘strong’ Christmas after revealing acceleration in sales
Grocery giant Sainsbury’s has said it is expecting a “strong” trading performance over the festive period after revealing an acceleration in sales.
The UK’s second largest supermarket firm said group revenues increased by 2.3 per cent to £17.2bn for the 28 weeks to September 14, compared with the same period a year earlier.
This came as like-for-like retail sales, excluding fuel, grew by 3.4 per cent for the period, driven by a 4.2 per cent jump in the most recent quarter.
Sainsbury’s said this was partly boosted by an improved performance in its Argos business.
Sales across Argos were 5 per cent lower for the half-year, after its decline slowed to 1.4 per cent in the second quarter from a 7.7 per cent slump in the first quarter.
Meanwhile, sales in the Sainsbury’s business grew by 4.6 per cent in the half-year, after growth improved to 5.1 per cent in the most recent quarter as it continued to improve its share of the UK grocery market.
The retailer said it was boosted by strong sales of its Taste the Difference premium range and its Nectar membership pricing.
Simon Roberts, chief executive of Sainsbury’s, said: “Our food business is going from strength to strength and we’re making the biggest market share gains in the industry, with continued strong volume growth.
“More and more customers are coming to us for their big food shop, recognising our winning combination of value, quality and service.
“As we head into the festive season, there is real energy and excitement at Sainsbury’s and Argos and we’re expecting another strong performance.”
Meanwhile, pre-tax profits dropped by 51 per cent to £76m because of the impact of the restructuring of its financial services division through a number of major sales.
Its total underlying pre-tax profit was up 4.7 per cent to £356m.
Keith Bowman, Equity Analyst at interactive investor said: “The story remains much the same at Sainsbury, with growth in grocery sales countered by falling general merchandise demand at Argos.
“The interim dividend stays unchanged at 3.9p per share, with a £200m share buyback programme on track to complete in the second half. Importantly, management’s profit guidance for the full year remains unchanged at between £1.01bn and £1.06bn.
“In all, falling general merchandise sales, hindered by pressured consumer spending under still heightened borrowing costs, continue to take their toll. The group’s struggle to differentiate itself from rivals persists, with intense price competition from discounters Aldi and Lidl and its own premium ranges up against those of Waitrose and Marks & Spencer, while the increasingly unpredictable weather remains a factor across the retailing industry.
“On the upside, grocery price increases below rivals are helping to fuel food volume demand increases. Cost savings of £1bn are being targeted. The previously announced sale of its core banking operations leaves management more focused on the performance of retail, while a share price to net asset value of under one compares to values of over five times at Amazon, Dunelm and Greggs, suggesting the shares are not obviously expensive.
“In all, and despite ongoing risks, a consensus analyst estimate of fair value sat at just over 300p per share and a forecast dividend yield of more than 5 per cent, underpin current City opinion pointing towards a buy.”