Sainsbury’s closes in on Asda in supermarket war
As the group posted a 9 per cent rise in half-time pre-tax profits to £433 million, analysts said the performance showed that it was the best-placed of the big four grocers ahead of the Christmas selling season. The company’s festive TV advertising campaign kicked off last night in the Coronation Street interval.
Justin King, Sainsbury’s chief executive since 2004, revealed that like-for-like sales in the 28 weeks to 28 September lifted 1.4 per cent. Total sales were up 4.4 per cent at £13.9 billion.
Latest industry figures show that the group’s share of Britain’s £130bn-a-year grocery market is standing at 16.8 per cent, its highest for a decade and within a whisker of Asda.
King said he was “very proud” that Sainsbury’s was the only one of the big four supermarket groups to be growing market share.
John Ibbotson, director of retail consultancy Retail Vision, said: “It [Sainsbury’s] has seen off the dual threat of the fast-improving discounter Aldi and the premium Waitrose, giving Tesco a humiliating lesson in how it should be done.”
Last month, Tesco posted a 1.5 per cent fall in first-half UK trading profit.
However, Sainsbury’s cautioned that same-floorspace sales growth may slow slightly in the second half due to tougher comparators. The interim dividend rises 4.2 per cent to 5p.
Convenience stores performed particularly well in the latest period, with sales up 20 per cent, while online sales were up 15 per cent, topping £1bn.
Sainsbury’s profit margin rose seven basis points to 3.47 per cent, while it revealed it closed the final-salary pension scheme for its staff on the last trading day of the period.
King said that the consumer climate remained tough. Despite signs the macro economic environment was improving “the reality for consumers is they are not seeing more money in their pockets”, he said.
Elsewhere in the business, its share of profits at the Sainsbury’s Bank joint venture with Lloyds was unchanged at £12m. The retailer is in the process of taking full control of the business early next year.
John Rogers, Sainsbury’s chief financial officer, said that, as research showed only 23 per cent of the group’s food retailing customers knew of the bank, it presented a “great opportunity” for the expansion of the business. The bank offers savings, unsecured loans, credit cards and insurance products, but has no current plans to go into mortgages.
Sainsbury’s took a £92m hit after it identified some sites where it no longer wishes to build stores. Rogers also said the firm had set aside £13m as a provision for a mystery “commercial item, for which we intend to defend our position”.
He added the company could not reveal more detail at this stage. Sainsbury’s shares closed up 11.9p, or nearly 3 per cent, at 410.70p.