Sainsbury's, Britain's second biggest supermarket group, kept its profit guidance for the full year after reporting a 7.4% rise in underlying sales for the key Christmas quarter.
The group, which has a 16% share of Britain's grocery market, trailing only Tesco, said it still expected 2023/24 underlying pretax profit of between £670 million (€777.7 million) and £700 million (€812.5 million), compared to the £690 million (€800.1 million) made in 2022/23.
Sainsbury's said that in the third quarter to January 6, grocery sales rose 9.3%, with stronger growth in volume, or number of products sold, offsetting lower inflation.
However, general merchandise sales fell 0.6%, while clothing sales fell 1.7%.
'Ahead Of The Market'
“We’ve worked hard to really deliver for our customers this quarter and have grown grocery volumes ahead of the market for the fourth Christmas in a row," commented Simon Roberts, chief executive. "More customers are choosing to shop at Sainsbury’s, recognising our determined focus on value, product innovation and service.
"We enter 2024 with strong momentum and next month we will share our updated strategy, building on all we’ve done to put food back at the heart of Sainsbury’s over the last three years. There is a lot to be excited about, and we remain absolutely committed to deliver for our customers, colleagues and shareholders.”
UK Retail Sales
Sainsbury's strong performance in food contrasts with industry data, published on Tuesday, showing lacklustre UK retail sales around Christmas across the wider market which may add to concerns that the economy has tipped into a mild recession, less than a year before a likely national election.
British shoppers have had to contend with high inflation and the Bank of England raising interest rates to a 15-year high of 5.25% in response to the jump in prices.
Analyst Viewpoint
“Sainsbury’s has a ‘food first’ strategy and the big question from its Christmas trading update is whether management is guilty of neglecting the other parts of the group," commented Russ Mould, investment director at AJ Bell. "Non-food sales were very disappointing, implying that Sainsbury’s is either leaving areas like clothing and Argos’ general merchandise offering to wither away or it simply isn’t pushing the products that people want.
“Sainsbury’s partially blames tough comparative figures from the previous year, yet it does feel as if Argos, in particular, has been bumped down the list of priorities for the group since Simon Roberts took over as chief executive.
“Despite the negative issues, the core food offering is doing well as illustrated by grocery volumes growing ahead of the market for the fourth Christmas in a row. Sainsbury’s used to sit in a difficult position – too expensive for people with limited resources and not attractive enough versus Waitrose for wealthier individuals. Prices have since been cut and its Taste the Difference ‘posher’ range is now having broader appeal.”
Additional reporting by ESM
