3rd Nov 2022 17:42
(Alliance News) - J Sainsbury PLC's half-year results showed revenue growth, but a falling bottom-line amid inflationary pressures.
Sainsbury's shares ended 5.6% higher at 208.88 pence each in London on Thursday.
Still, analysts took heart from the grocer's progress at cutting costs, as well as eating into market share.
The grocer's profit in the 28 weeks to September 17 fell by 30% to GBP376 million from GBP527 million, the London-based supermarket chain said, blaming high inflation.
Revenue proved resilient, however, growing 4.4% year-on-year to GBP16.41 billion from GBP15.72 billion.
Sainsbury's will pay an interim dividend of 3.9 pence per share, up 22% from 3.2p a year before, and backed its annual underlying pretax profit guidance of GBP630 million to GBP690 million.
The company expects to deliver over GBP1.3 billion of cost savings in the three years to financial 2024, more than doubling run rate savings from the three years to financial 2020.
"This is helping mitigate higher than expected operating cost inflation," Sainsbury's added.
AJ Bell analyst Russ Mould commented: "Investors always like to see costs coming out of a business, so long as it's done in a sustainable way and Sainsbury's is ticking that box at the moment."
Sainsbury's said it has "grown market share in both grocery and general merchandise".
Analysts at RBC Brewin Dolphin took note of the supermarket chain's profit fall.
"Sainsbury's, much like its peers in the UK groceries market, is stuck between a rock and a hard place with tough comparators during the Covid-19 pandemic, increasing labour costs, and the impact of high inflation. Sales have remained robust, but the effects of the macro-economic situation are beginning to filter through into profitability, with an 8% fall in first-half profit," RBC Brewin Dolphin analyst Zoe Gillespie commented.
"That said, cashflow remains strong and Sainsbury's has been taking a range of self-help measures – including investing in lower prices for customers – to navigate its way through a tricky environment. It is a tough time for supermarkets, but Sainsbury's is taking some good steps in the right direction and is well-placed for the key Christmas period."
Looking to the Christmas period, Sainsbury's said it will launch 300 new products, more than half of those in its premium Taste the Difference. Taste the Difference is outperforming the market, the company said "as customers choose to treat themselves at home".
By Eric Cunha; [email protected]
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