UK's Sainsbury's follows Tesco in lifting profit outlook

Sainsbury's Raises Full-Year Profit Outlook After Solid First Half Results

Sainsbury's Financial Performance and Strategic Developments

First Half Results and Profit Outlook

By James Davey

LONDON, Oct 22 (Reuters) - Sainsbury's, Britain's second-biggest supermarket group, followed industry leader Tesco in upgrading the lower end of its full-year profit outlook on Thursday after posting a 3.6% rise for its first half despite slower sales growth.

Merger Talks and Market Position

The first half results were published two weeks after media reports that Sainsbury's held merger talks with smaller rival Morrisons earlier this year but walked away.

Sainsbury's, which has a 15.2% share of Britain's grocery market, trailing only Tesco, said like-for-like sales, excluding fuel, rose 1.2% in its second quarter, below analysts' average forecast, having been up 2.3% in the previous quarter.

Sales Breakdown

Grocery sales rose 2.2% in the second quarter but general merchandise and clothing sales fell 2.9%.

Market Challenges and Strategic Focus

"Looking to the second half, we expect the market to remain very competitive and we will make deliberate, balanced choices to sustain the strength of our offer, investing in value, quality, availability and service," Sainsbury's said.

Comparative Performance and External Factors

Sainsbury's was up against a strong comparative performance in the first half last year when like-for-like sales rose 4.5%, boosted by disruption at competitors Marks & Spencer, the Co-op and Asda.

The conflict in the Middle East and its impact on energy and motor fuel prices also ate into discretionary household expenditure during the first half of this year.

Business Transactions and Profit Forecast

Argos Sale

In July, Sainsbury's agreed to sell its Argos general merchandise business to Swift Partners for at least £120 million.

Profit Figures and Guidance

For the six months to September 12 Sainsbury's posted continuing underlying operating profit of £525 million ($704 million) reflecting volume growth in food and cost savings.

It now forecasts full-year to end-February 2027 total underlying operating profit of between £1.025 billion and £1.065 billion, up from previous guidance, adjusted for the disposal of Argos, of £965 million to £1.065 billion.

Share Performance and Currency Note

Shares in Sainsbury's are up 11% so far this year.

($1 = 0.7461 pounds)

(Reporting by James Davey; editing by Sarah Young)