Sainsbury’s half-year profits & sales rise amid consumer outlook warning

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Sainsbury's half year

Sainsbury’s has reported a rise in half-year profit and sales amid a warning over an “uncertain” consumer outlook and competitive market as the peak Christmas period looms.

The Big 4 grocer, which is pressing ahead with plans for a £12 billion merger with rival Asda, said underlying pre-tax profits rose 20 per cent to £302 million in the six months to September 22, up from £251 million a year earlier.

However, on a statutory basis, pre-tax profits dropped 40 per cent to £132 million and profit for the financial period came in at £144 million compared to £166 million this time last year.

This reflected costs stemming from its proposed merger with Asda, the integration of Argos and Habitat, and the restructuring of its retail operations.

Underlying group sales grew 3.5 per cent to £16,88 billion, and on a statutory basis grew from £14,64 billion to £15,12 billion.

Sainsbury’s said the summer heatwave helped boost sales over its second quarter, with like-for-like growth including Argos, but excluding fuel, accelerating to one per cent, up from 0.2 per cent in the previous three months.

This meant overall like-for-like sales excluding fuel grew 0.6 per cent.

Broken down, Sainsbury’s interim sales figures showed that grocery sales rose 1.2 per cent, while overall general merchandise sales lifted 1.5 per cent – although non-food profit margins remained under pressure.

Clothing sales also fell one per cent in the first half due to changes in promotions.

It also hailed the £160 million in earnings synergies it had projected from the 2016 takeover of Argos, nine months ahead of its original schedule, added that this helped drive £51 million in underlying profit growth over the half year.

Sainsbury’s cautioned that the consumer outlook was “uncertain as we head into our key trading period” and said markets remained “highly competitive and very promotional”.

Nonetheless, it said it remained on track for full-year expectations, with analysts predicting underlying pre-tax profits of around £634 million.

“The market remains very competitive and we are transforming our business to meet rapidly changing customer needs,” chief executive Mike Coupe said.

“We have fundamentally changed how our 135,000 Sainsbury’s store managers and colleagues work and I would like to thank them for their ongoing hard work through this period.

“We have delivered a solid first half performance and profit has increased because we have delivered significant Argos synergies ahead of schedule.

“Sales of food and general merchandise were boosted by the hot summer, but general merchandise margins remain under pressure.

“Our strategy of offering customers a distinctive range of high quality and great value food has driven like-for-like sales growth at Sainsbury’s. Where we have invested to lower prices, volumes and transactions have increased.”

The CMA is currently conducting an in-depth Phase Two review into the proposed merger with Asda and Coupe said Sainsbury’s continued to “engage constructively” with the competition watchdog.

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