12th Jan 2022 09:34
(Alliance News) - J Sainsbury PLC on Wednesday upgraded profit guidance for its financial year ending in March, following stronger-than-expected sales in its third quarter.
The updated estimate annual pretax profit is GBP720 million, a 9.1% increase from the previous estimate of GBP660 million released back in June.
This would be more than double the GBP356 million in underlying pretax profit recorded in financial 2021. What's more, it would up 23% on GBP586 million in the year that ended in March 2020, meaning before the pandemic took hold.
The supermarket chain said that higher-than-expected grocery volumes and structural cost savings accounted for the raised guidance. These have offset higher operating costs due to inflation, and the company's investment in customer proposition.
"Our bold investments in value, new products and service have driven volume market share gains, growing ahead of the market through the third quarter and the key Christmas period over one and two years," the company said.
For the 16 weeks to January 8, total retail sales, excluding fuel, were down 5.3% year-on-year, worse than the year-on-year decrease of 1.7% in the company's second quarter. However, when fuel sales for the third quarter are taken into account, sales were only down 0.1% on a year before.
Sainsbury's said fuel sales increased by 48% in the third quarter, gaining further market share for the brand as customer demand normalised during this period.
The supermarket's Groceries Online sales were 92% higher than two years before in the third quarter, but down 17% from last year overall. However, the Christmas week alone, online orders were up 41% year-on-year.
Limited availability and a focus on profitable sales over promotional activity saw General Merchandising and Clothing sales down 16% year-on-year, but this was in line with expectations after an exceptional performance in the previous year, Sainsbury's asserted.
Sainbury's said its operating profit expectation Financial Services, which included Sainsbury's Bank, is running ahead of its forecast of GBP26 million for the year ending in March, considerably improved from an operating loss of GBP21 million in the previous year. This reflects progress in reducing costs, and an increased demand credit and consumer spend, as well as lower than expected bad debts, the company said.
From March, the supermarket chain plans to invest GBP100 million to increase employee base pay rate to GBP10 per hour.
Sainsbury's shares were up 1.7% to 284.08 pence each on Wednesday morning in London.
Chief Executive Officer, Simon Roberts, commented: "I am really pleased with how we delivered for customers this Christmas. More people ate at home and our significant investment in value, innovation and service led to market share growth. At the same time, we are pleased to increase profit guidance for the full year."
By Elizabeth Winter; [email protected]
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