(Nov 6): J Sainsbury plc raised its profit guidance as the UK’s second-largest supermarket benefitted from strong food sales and its loyalty programme discounts attracted shoppers.
The grocer now expects full-year underlying operating profit from retail to exceed the £1 billion it set out in its previous guidance. The boost comes after like-for like sales rose 4.5% in the 28 weeks ended Sept 13, the supermarket said on Thursday, in line with analyst estimates.
Shares of Sainsbury’s rose as much as 2.1% in London. They had risen 23% this year through Wednesday’s close.
Sainsbury’s has used its Nectar loyalty card promotions and price-matching against budget chain Aldi to attract shoppers in what is a competitive UK market, where food inflation is exacerbating cost-of-living pressures. Larger rival Tesco plc also nudged up its profit forecast last month.
“There’s been caution in customers throughout the year because inflation’s been increasing and that’s why there’s focus on value for money,” Sainsbury’s chief executive officer Simon Roberts told reporters on a call.
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Grocers including Sainsbury’s signed a letter to Chancellor of the Exchequer Rachel Reeves in October warning that households would “inevitably feel the impact” of any tax increases in her budget this month, such as higher business rates for supermarkets. Roberts said that was adding to shoppers’ uncertainty.
Still, the results will likely give the retailer a boost ahead of key festive trading. Sainsbury’s, which also owns general merchandise retailer Argos, is hiring 19,000 workers to fill shelves and deliver gifts over the Christmas period.
“We are encouraged by the progress it has made in improving its price-value credentials,” RBC Capital Markets analysts including Manjari Dhar said in a note, calling Sainsbury’s “a strong player” in UK retail. They also noted improved performance at Argos, where sales rose 2.3% in the period.
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In September, Sainsbury’s terminated talks to sell Argos to JD.com Inc, accusing the Chinese e-commerce firm of trying to “materially revise” the terms of the deal. It was a quick U-turn after Sainsbury’s had previously said that JD.com could drive growth at Argos.
Roberts said on Thursday it was in the best interests of Sainsbury’s to walk away from the talks, adding that the retailer is not currently in any discussions.
Sainsbury’s also said it would return an additional £150 million to shareholders after the disposal of its banking operations raised more than expected.
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