– Food expenditure compensates for the decline in non-food
– Record sales of alcohol during the Jubilee weekend
– Pre-tax profit target maintained for the full year
Supermarket shares Sainsbury’s (SBRY) edged up 2p to 211p after the company issued an unexceptional first-quarter trading update, but stuck to its full-year profit forecast.
Sales in the 16 weeks to the end of June were buoyed by the Jubilee weekend, which saw Britons splurge on everything from cream teas to Pimms and champagne, making up for a weak performance in non-food items.
Managing Director Simon Roberts will no doubt have thanked his lucky stars for the platinum jubilee when he read the first quarter cash rolls.
Thanks to street parties across the country and customers overflowing with scones and clotted cream, washed down with record sales of beer, wine and spirits, grocery sales for the period were just 2. 4% to those of the previous year.
The company’s upscale Taste the Difference brand saw sales jump 12% over the Jubilee weekend, while weekly alcohol sales were the highest on record outside of Christmas and Easter .
Online grocery sales were another bright spot, with revenue more than 90% above pre-pandemic levels and the group retaining the customers it gained during the lockdown.
The company said its Aldi Price Match and Quality campaigns stimulate the growth of secondary customers or those who make a secondary shop at Sainsbury’s while making their main shop in other stores.
PRESS ON CONSUMERS
Non-food sales were less resilient, however, with in-store sales down 14.6% and Argos sales down 10.5%, although the first five weeks of the quarter saw an extremely strong period. last year.
In the 16 weeks to June 25, the UK’s second-largest grocer by market share saw an overall decline of 4.5% in total non-fuel sales.
“The pressure on household budgets will only intensify over the rest of the year,” Roberts said, reiterating his pledge to invest up to £500m to bring prices down over the next two months. years until next March.
“We are working hard to reduce costs across the business so that we can continue to invest in the areas that matter most to customers,” he added.
Critically, despite fears of a slump in consumer spending, the company stuck to the profit forecast it gave in April of underlying pre-tax profits of between £630m and £690m, at relief for analysts and investors.
Analysts at house broker Shore Capital said they were “pleased and relieved” to maintain their financial guidance as Sainsbury’s navigates an increasingly difficult trading environment.
On their current estimates, however, they think Sainsbury’s shares “appear to be rated too poorly”, even in the face of further rate hikes and consumer uncertainty which they say are “more than fully priced in.” “.
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Date of issue: Jul 05, 2022