2nd Nov 2023 11:55
(Alliance News) - J Sainsbury PLC shared an upbeat set of half-year results, crediting its renewed focus on value and food, but the supermarket faces "ferocious" competition on prices in the key festive trading period.
Sainsbury's shares were sent higher as the company said it expects underlying profit to come in at the upper range of its guidance for its financial year, reporting "strong volume and market share growth" in its first half.
They were up 4.3% to 273.10 pence each in London late on Thursday morning.
In the 28 weeks ended September 16, the grocer's group sales including value-added tax rose 2.9% annually to GBP18.67 billion from GBP18.34 billion. However, excluding fuel, they rose 7.7% to GBP15.81 billion from GBP14.67 billion.
CMC Markets' Michael Hewson commented: "Grocery sales were particularly strong, rising 10%, while its Argos business saw general merchandise sales rise by 1.7%, which was a welcome surprise given that in the lead-up to today's numbers this was an area that was identified as a possible weak spot."
"As with Q1, clothing sales were a weak point but that isn't surprising given recent trading updates from other clothing retailers who have reported weak sales, due to this year's variable weather."
Pretax profit fell 27% to GBP275 million from GBP376 million, which the company said largely reflects non-cash movements and one-off income from legal settlements in the prior year. On an underlying basis, pretax profit was flat on-year at GBP340 million.
The retailer expects the strength of its volume performance to drive annual underlying pretax profit to between GBP670 million and GBP700 million, the upper half of its previous guidance range. It brought in GBP690 million in financial 2023. It also raised retail free cash flow guidance to at least GBP600 million from at least GBP500 million.
The firm left interim payout unchanged at 3.9 pence.
"Food is firmly back at the heart of Sainsbury's. We've never been more competitive on price and our focus on value, innovation and service is giving more customers more reasons to shop with us," said Chief Executive Simon Roberts.
Richard Hunter, interactive investor's head of Markets, said: "Sainsbury's relentless focus on value is reaping some rewards, which could position it well in the lead up to the key Christmas trading period."
"Keeping shopping prices low has had a positive impact on the group's market share, but of course this comes at a cost to Sainsbury itself. Since March, for example, the company has invested GBP118 million on price reductions. The ferocity of competition, particularly in the supermarket arena, is well established and shows little sign of abating, such that the group will need to keep a constant lid on prices in order to remain in the mix," he warned.
By Elizabeth Winter, Alliance News senior markets reporter
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