J Sainsbury Plc, Britain’s third-biggest supermarket company, said full-year profit will surpass expectations on improved sales, a rare bright spot for U.K. grocers who remain embroiled in a price war with German discounters.
Full-year pretax profit will “moderately” surpass analysts’ expectations of 548 million pounds ($831 million) this year, helped by higher-than-expected cost savings, the London-based retailer said Wednesday. The consensus estimate was compiled by the company. The stock rose as much as 9.5 percent.
“This is the first time we’ve seen a U.K. supermarket company guide up profits for a long time," Richard Clarke, an analyst at Sanford C. Bernstein, said by phone. “Sainsbury’s is predicting they won’t have to slash prices in the second half of the year."
Amid falling food prices and intense competition, earnings at Britain’s largest supermarkets have dwindled over the last 18 months as an increasing number of shoppers have defected to Aldi and Lidl. In order to better compete with the discounters, Sainsbury and its large rivals have plowed hundreds of millions of pounds into price cuts.
Revenue at stores open at least a year fell 1.1 percent, excluding fuel, in the 16 weeks ended Sept. 26, the grocer said. That beat analyst estimates for a 1.3 percent drop and compares with a 2.8 percent decline in the same period last year.
Sainsbury’s convenience-store business has helped the company mitigate declining revenue at its larger stores, as consumers increasingly opt to shop more frequently for fewer items. The retailer opened 27 new smaller outlets in the quarter.
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