Tuesday 26 September 2017

Sainbury's outperforms competitors with 7pc first half profit rise

Retailer Sainsbury's posted a 7pc rise in first-half profit, outperforming rivals as a strategy focused on own brand products while investing in fast growing online and convenience channels chimed with consumers.

The firm said on Wednesday it was "well placed" for more growth even though it cautioned that any recovery in the economy may take time to take effect.

Sainsbury's, which trails market leader Tesco by annual sales and is battling to be Britain's No. 2 grocer with Wal-Mart's Asda, made profit before tax and one-off items of £400m in the six months to Sept. 28.

That compared with analysts' forecasts of £390-400m, with a consensus of £394m, according to a company poll, and was up from £374m last year.

Sainsbury's has enjoyed 35 consecutive quarters of underlying sales growth and its UK market share of 16.8pc is its highest for a decade. It is continuing to outshine Tesco, which last month posted a 1.5pc fall in first half UK trading profit.

First half sales rose 4.4pc to £13.95bn, while sales at stores open over a year, excluding fuel, were up 1.4pc and its operating margin rose 7 basis points to 3.47pc.

Online and smaller local convenience stores are the two fastest growing areas in the grocery sector as shopping habits change. Consumers are increasingly using the internet to shop and high fuel prices are discouraging trips to town centres and out-of-town malls.

Sainsbury's online grocery sales rose by 15pc in the half, while convenience store sales increased over 20pc.

The firm has also benefited from the success of its "Brand Match" price comparison scheme, increased sales of non-food products, especially clothing, kitchen electrical and cookware, and its avoidance of any involvement in a scandal over foods found to contain horsemeat when they were labelled as containing other meats.

Sainsbury's is paying an interim dividend of 5.0 pence, up 4.2pc.

Shares in Sainsbury, up 16pc so far this year, closed Tuesday at 399 pence, valuing the business at £7.6bn.

Reuters

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