Sainsbury’s expects its full-year profits to beat market expectations despite a 1.1% fall in like-for-like sales during its second quarter.
- Sainsbury’s second-quarter like-for-likes drop 1.1% excluding fuel
- Sales volumes and transactions both grow
- Grocer says full-year profits will be “moderately ahead” of expectations
The grocer reported a growth in sales volumes and the number of transactions during the 16 weeks to September 26 and forecast that full-year pre-tax profits would be “moderately ahead” of City consensus.
Sainsbury’s total retail sales edged up 0.3% during the period as bosses insisted its strategy was “progressing well in a challenging market.”
“Whilst the market is clearly still challenging, with food deflation impacting many categories, we are making good progress on delivering our strategy”
Mike Coupe, Sainsbury’s
But the fall in like-for-likes represented a seventh consecutive quarter of decline. Like-for-likes including fuel were down 3.3%.
The supermarket giant, which has been engulfed in what boss Mike Coupe has called a “perfect storm” of a fierce price war, food price deflation and changing consumer habits, has changed tack by moving away from promotional activity and investing in price.
It said customers “value our lower regular prices”, a fact that drove improvements in sales volumes and transactions during the period.
Chief executive Coupe said: “During the quarter we saw an improvement in our key trading metrics. Both volume and transactions grew as the decline in average basket spend in supermarkets continued to stabilise.
“Whilst the market is clearly still challenging, with food deflation impacting many categories, we are making good progress on delivering our strategy.
“Year-to-date we have traded well, with both sales and cost savings ahead of expectations. Should current market trends continue, we expect our full year underlying profit before tax to be moderately ahead of our published consensus.”
Coupe added that investments in its own-label lines sparked a 4% uplift in sales volumes of its Taste the Difference range during the quarter.
He added that switching away from promotions to an everyday low price model had aided improvements in demand forecasting, driving “better availability and lower than expected levels of waste”.
Online and convenience
Sainsbury’s opened 27 convenience stores during the period as it continues to focus on expanding its c-store business.
Online grocery orders grew by more than 15% as the supermarket giant increased the number of click-and-collect sites to 52. Earlier this year it revealed plans to roll out the service to 100 stores.
Sainsbury’s also launched its Tu clothing website during the quarter and Coupe added that the first six weeks of trading had “significantly exceeded our expectations” as clothing sales grew almost 13% during the period.
According to the latest figures published by Kantar Worldpanel, Sainsbury’s was the only member of the big four grocers to grow sales in the 12 weeks to September 13.