J Sainsbury Plc said profit this year will be boosted by a jump in third-quarter sales as shoppers spent more over the festive period.
(Bloomberg) — J Sainsbury Plc said profit this year will be boosted by a jump in third-quarter sales as shoppers spent more over the festive period.
Britain’s second-largest grocer now expects an underlying profit before tax toward the top end of a range of £630 million ($766 million) to £690 million. Sainsbury said it had a record Christmas with a gain in sales that was not only driven by higher prices but the volume of goods sold too.
Sainsbury’s stock fell more than 1% in early trading in London.
Sainsbury has had to absorb some of its own surging costs while at the same time keeping prices keen and shoppers loyal. British supermarkets fought fiercely to attract customers in the approach to Christmas and German discounters Aldi and Lidl saw record sales as consumers sought to save money on groceries.
Sainsbury’s stock fell 21% last year.
Investors had largely “priced in” Sainsbury’s positive update to guidance and the results are “no better than expected,” Jefferies analyst James Grzinic wrote in a note to clients.
The grocer said last month that it’s spending an extra £50 million on keeping prices down, taking the total investment to £550 million. This includes price matching discount rival Aldi on around 300 products and increasing the number of own-brand items where the prices are locked for a period of time.
Sainsbury also has to contend with the higher cost of staff. The business said this month that it’s investing £205 million in employee pay to boost salaries with staff earning £11 an hour outside London and £11.95 within the capital. Sainsbury is offering an additional six months of free food for employees in stores and depots.
Chief Executive Officer Simon Roberts said the grocer benefitted from people hosting larger gatherings at Christmas once again after two years of Covid restrictions. The football World Cup also boosted sales and shoppers bought early to spread the cost of Christmas given the impact of inflation on spending power.
Sales of general merchandise at catalogue retailer Argos performed well as shoppers bought Christmas gifts for their family and friends.
Sainsbury said retail free cash flow will be £100 million higher than previously guided thanks to the strong performance.
(Updates with shares in third paragraph and more details from fifth paragraph.)
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