Published by Global Banking and Finance Review
Posted on January 25, 2025
By James Davey
LONDON (Reuters) -Sainsbury's, Britain's second biggest supermarket group, is on track to deliver full-year profit growth of around 7%, it said on Friday, after robust food sales over the Christmas quarter offset weakness in general merchandise.
The group, which trails only Tesco by market share, reported a 2.8% rise in underlying sales for its third quarter to Jan. 4.
Grocery sales rose 4.1%, driven by strong demand for party food, Champagne and sparkling wine, but general merchandise and clothing sales in Sainsbury's stores fell 0.1%, and sales fell 1.4% at its Argos business.
Like Tesco, Sainsbury's benefited from the trend of Britons dining at home more, boosting sales of its premium "Taste the Difference" range by 16% in the Christmas weeks.
"We have won grocery market share for the fifth consecutive Christmas, with more customers choosing Sainsbury's for their big shop," CEO Simon Roberts said.
Shares in the group were down 2.6%, while other retailers also fell - mirroring Thursday's corporate updates when strong Christmas trading at Tesco and Marks & Spencer was overshadowed by concerns about the strength of the economy and consumer for 2025.
Sainsbury's said it expected its full-year retail underlying operating profit, its preferred profit measure, to be in line with analysts' consensus and the midpoint of its guidance range of 1.01-1.06 billion pounds ($1.24-$1.30 billion), representing growth of around 7%.
It said its strategy of matching discounter Aldi's prices on hundreds of items and providing better offers for members of its popular Nectar loyalty scheme, financed by cutting costs, was paying off, helping it win market share.
"The strength in grocery is a sign of management’s turnaround continuing to work whilst we think Argos weakness is cyclical and should recover over the next 12 months," Bernstein analyst William Woods said.
Industry data published on Tuesday showed Sainsbury's ended 2024 with a UK grocery market share of 16.0%, up 20 basis points on the year.
The whole sector, however, faces pressures from rising costs and inflation as the British economy struggles to grow.
Sainsbury's said in November increased social security payments imposed in the new Labour government's first budget last October would add 140 million pounds to its tax bill in its 2025/26 year.
It said on Friday it would raise pay for its hourly-paid workers by 5% this year, split into two separate increases, but would be cautious on additional hiring.
($1 = 0.8148 pounds)
(Reporting by James Davey, Editing by Paul Sandle and Barbara Lewis)
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