7th May 2014 08:10
LONDON (Alliance News) - British supermarket chain J Sainsbury PLC Wednesday reported higher pretax profit for its recent financial year, as the group's convenience stores and online offering continued to drive the group forward.
The UK's third-largest grocer, after Tesco PLC and Wal-Mart's ASDA, reported an underlying pretax profit of GBP798 million for the year ended March 15, up 5.3% from GBP758 million a year earlier and beating analyst expectations for an underlying pretax profit of GBP782 million.
The group proposed a full year dividend of 17.3 pence, up 3.6% from the 16.7 pence a year earlier.
Underlying figures exclude any profit or loss on the disposal of properties, investment-property fair-value movements, financing fair-value movements, and one-off items.
On a statutory basis, which includes all these items, the group reported pretax profit of GBP898 million, up 16% on the GBP772 million reported a year earlier.
Group sales for the year, excluding VAT and including fuel, increased 2.8% to GBP23.95 billion, compared with GBP23.30 billion.
Like-for-like sales including VAT and excluding fuel grew only marginally at 0.2%, and the group said it is forecasting similar growth again for the year ahead.
A big part of Sainsbury's success story is its own-brand range and its premium own-brand "Taste the Difference" range, which have both continued to growth, with "Taste the Difference" achieving over GBP1.1 billion in annual sales during the year.
Another is the group's convenience business, which grew 19% over the last year, as well as the group's general merchandise and clothing arm, which is growing at twice the rate of food.
Sainsbury's also said its online business grew by more than 12% during the year, achieving over GBP1 billion in annual sales.
Mike Coupe will take the reins on July 9 from outgoing Chief Executive Officer Justin King and faces a challenge to maintain momentum, as the group's profit is expected to fall to around GBP752 million in the year ahead.
With King at the helm, Sainsbury's has been reluctant to embark on a round of price cuts like its other main rivals Tesco and Wm Morrison Supermarkets PLC, both of which recently launched a round of price cuts in a bid to fend off competition from German discounters Aldi and Lidl.
While the grocer said that conditions in the retail food sector are likely to remain challenging for the foreseeable future, it said that it is still confident in outperforming peers in the year ahead.
"Of course we will match our competitors toe to toe, but we will do that through brand match...In the end that is what the strength of this brand is built on," King told journalists Wednesday.
During the year, the group spent GBP888 million, or 3.4% of sales on capital expenditure, significantly lower than analysts had been expecting of around GBP1.8 billion. Coupe said lower capex is a sign of things to come.
"During the year we spent less of IT and logistics. What we've guided for this year is a similar capital expenditure figure, as we are cutting our estate, while investing in our store estate, and refurbishment," Coupe told journalists in a call after the results.
The group ended the year with net debt of GBP2.4 million, including the money it paid to Lloyds Banking Group PLC for the remaining 50% of the former Sainsbury's Bank joint venture, which it fully purchased during the year and now 100% owns.
J Sainsbury shares were up 1.9% Wednesday morning, trading at 339.80 pence.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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