UK’s Sainsbury’s expects full year profit growth of up to 10%

reuters_tickers

By James Davey

LONDON (Reuters) -British supermarket group Sainsbury’s stuck to its full-year forecast of up to 10% profit growth on Thursday after a 3.7% rise in the first half, with robust grocery sales offset by weakness in general merchandise.

Sainsbury’s strategy of matching discounter Aldi’s prices on hundreds of essential items and providing better offers for members of its Nectar loyalty scheme, financed by cutting costs, is paying off for CEO Simon Roberts.

The group is also benefiting from the continuing trend of Britons dining at home more, with sales of its premium Taste the Difference range up 18% in the first half.

“Our food business is going from strength to strength and we’re making the biggest market share gains in the industry, with continued strong volume growth,” said Roberts, adding that he was expecting another “strong performance” at Christmas.

Sainsbury’s has a UK grocery market share of 15.2%, the latest data from researcher Kantar shows, up 40 basis points year-on-year.

Britain’s No. 2 grocer after Tesco said it still expected 2024/25 retail underlying operating profit, its preferred profit measure, of between 1.01 and 1.06 billion pounds ($1.31-$1.37 billion), growth of 5% to 10% versus 2023/24.

The group said it also still expected to generate retail free cash flow of at least 500 million pounds.

For the six months to Sept. 14, Sainsbury’s made 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, rose 4.2%, having been up 2.7% in the first quarter.

Grocery sales rose 5.3% and general merchandise and clothing sales in Sainsbury’s stores were up 2.2%. However, sales at the Argos business fell 1.4%.

“We remain confident of delivering strong profit growth in the full year, with continued leverage from Sainsbury’s grocery volume growth and a stronger Argos H2 performance,” said the group, whose share price is flat year-on-year.

($1 = 0.7734 pounds)

(Reporting by James Davey;Editing by Catarina Demony and Alexander Smith)