Grocery sales at Sainsburys were up 10.1% in the 28 weeks ending 16 September 2023, but general merchandise and clothing took a hit due to “tough weather” and a “promotionally-driven market”.
The supermarket said it has gained volume from all of its grocery competitors, and looks to build on its the success of its Food First strategy.
Its interim results showed retail operating profit of £485mn, up 2%, which the supermarket said reflected its strong volume-driven grocery profit growth, but was partially offset by the impact of weaker seasonal sales on General Merchandise profits
General Merchandise sales were up 1.1% despite tough weather over the summer, and were in fact up 2.5% excluding the impact of the closure of Argos in the Republic of Ireland.
Clothing sales were down 8.4%, which Sainsbury said was due to a seasonally weak and promotionally-driven market.
“We know people are still finding things tough and we’re working harder than ever to reduce our costs, putting the money back into our customers’ pockets through lower prices on the products they buy most often,” said Simon Roberts, chief executive of J Sainsbury plc.
“I’m pleased to say food inflation is coming down and we are passing savings on to customers. We’ve rolled out Nectar Prices to over 6,000 products and the vast majority of customers are now shopping with Nectar, saving over £450mn since April.
“Food is firmly back at the heart of Sainsbury’s. We’ve never been more competitive on price and our focus on value, innovation and service is giving more customers more reasons to shop with us.”
Sainsbury’s expect its grocery growth to continue and to result in underlying profit before tax of between £670mn – £700mn in FY2023/24 .
One analyst has called this “a relatively underwhelming set of results” especially when compared to “sector leader Tesco”.
John Choong, senior equity research analyst at Investing Reviews, said: “Lower fuel and general merchandise sales weighed down what would have otherwise been a great half, which is sure to dampen sentiment. The fact that underlying operating margins shrunk won’t impress investors either, as this translated into lower profitability.
“Following the high expectations after Tesco’s stellar results last month, it looks like investors will have to wait a little longer before the new nectar turns into the honey of more revenue.”
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