Sainsbury’s has lifted its profit targets for the full year even as it reported slowing sales and warned of “tough” conditions in the coming months.
The UK’s second-largest supermarket said the “consistent strength of our customer offer” is driving sales growth and gains in market share, despite chief executive Simon Roberts warning that “many households are finding things tough at the moment”.
Sainsbury’s has lifted the lower end of its full-year profit target from £965m to £1.025bn, with an upper range of £1.065bn.
The FTSE 100 firm’s like-for-like sales growth slowed in the three months to September, from 2.3 to 1.2 per cent. Grocery sales growth slowed from 3.5 to 2.2 per cent while general merchandise and clothing sales improved slightly, from a decrease of 3.7 to 2.9 per cent.
Since becoming chief executive of Sainsbury’s in 2020, Roberts has pushed for the grocer to focus more on its food offering. In July, Sainsbury’s sold Argos – the struggling general retailer it owns – to Swift Partners for £120m.
The impact of this sale on Sainsbury’s’ balance sheet pushed the firm to pre-tax loss of £164m in the first half of the year, though its underlying pre-tax profit improved by five per cent to £366m.
Roberts told shareholders on Thursday that the disposal of Argos will help to create a “simpler, more focused Sainsbury’s”. The grocery boss said demand for its up-market Taste the Difference range is driving its growth in food.
Sales in this category grew by more than six per cent in the second quarter. The supermarket’s “restaurant-quality” Taste the Difference Discovery Range – which sits at an even higher price point and includes BBQ and Italian offerings – will soon reach 200 products, Roberts said.
Sainsbury’s walks away from Morrisons talks
Demand for up-market food is growing despite reports of plummeting consumer confidence. Roberts said: “We know many households are finding things tough at the moment and we’re making it easier for customers to enjoy good food every day, whatever their budget.
“That’s why more people are choosing us for their weekly shop, driving continued volume growth in the first half.”
Surging energy and supply costs caused by the Iran war are set to push food inflation beyond six per cent by July next year, but supermarket bosses have so far refused to say whether the conflict is putting pressure on their prices.
Tesco boss Ken Murphy has said he doesn’t recognise industry inflation forecasts while Murphy said earlier this year that grocery price rises have not been as bad as feared.
Sainsbury’s market share slipped from 15.3 to 15.2 per cent in the year to October, according to Worldpanel data, leaving it behind market leader Tesco, on 27.8 per cent.
The supermarket’s attempts to gain on its rival were thrown into the spotlight earlier this month when it emerged that it had held merger talks with smaller rival Morrisons.
The supermarket walked away from discussions in February following a disagreement over price but the revelation was taken by many in the retail sector to signal the start of a fresh wave of consolidation among the UK’s retailers.