British supermarket giant Sainsbury’s reaffirmed its full-year profit growth forecast of up to 10% on Thursday, following a 3.7% rise in profits during the first half of the year.
This growth was driven by strong grocery sales, which offset a weaker performance in general merchandise.
CEO Simon Roberts highlighted the effectiveness of Sainsbury’s strategy to compete with discount retailer Aldi by matching prices on hundreds of essential items and enhancing offers for members of the Nectar loyalty scheme. These initiatives, supported by cost-cutting measures, have been instrumental in boosting the group's financial performance.
Sainsbury’s has also benefited from the ongoing trend of more Britons choosing to dine at home. Sales of the premium “Taste the Difference” range surged by 18% in the first half, reflecting this shift in consumer behavior.
“Our food business continues to go from strength to strength, and we’re achieving the largest market share gains in the industry, alongside sustained volume growth,” Roberts said. He also expressed confidence in maintaining a robust performance during the upcoming Christmas season.
According to data from market researcher Kantar, Sainsbury’s holds a 15.2% share of the UK grocery market, marking an increase of 40 basis points compared to the previous year.
As Britain’s second-largest grocer after Tesco, Sainsbury’s reiterated its expectation for the 2024/25 retail underlying operating profit—its preferred profit metric—to be between 1.01 and 1.06 billion pounds ($1.31-$1.37 billion), representing growth of 5% to 10% from 2023/24.
The group also maintained its forecast of generating at least 500 million pounds in retail free cash flow.
For the six-month period ending September 14, Sainsbury’s reported a retail underlying operating profit of 503 million pounds, up from 485 million pounds in the same period last year.
Second-quarter like-for-like sales, excluding fuel, increased by 4.2%, following a 2.7% rise in the first quarter. Grocery sales grew by 5.3%, while general merchandise and clothing sales in Sainsbury’s stores rose by 2.2%. However, sales at its Argos unit fell by 1.4%.
“We remain confident in delivering strong profit growth for the full year, leveraging the continued grocery volume growth and anticipating a stronger performance from Argos in the second half,” the company stated. Sainsbury’s share price has remained flat year-on-year. Photo by Chris J Dixon, Wikimedia commons.