Supermarket Sainsbury’s (SBRY) ticked up 1% to 280.9p. The shares building on a recent strong run in the wake of a blockbuster bid for Morrisons (MRW), as it upgraded its annual profit guidance after its first-quarter sales, excluding fuel, rose by a better-than-expected 1.6%.
Underlying pre-tax profit for the year through December was now expected at at least £660 million, with progress weighted to the second half, the company said.
On a like-for-like basis, sales for the three months through June, excluding fuel, also rose 1.6%, with sales of grocery, general merchandise and clothing all exceeding company expectations.
Sainsbury’s said grocery sales benefited from higher in-home consumption due to continued Covid-19 restrictions, plus growing market share.
General Merchandise sales, or in other words Argos sales, were lower than last year's elevated levels but ahead of expectations, 'despite global supply challenges which are likely to continue for the remainder of the year’.
BEATING TESCO
Chief executive Simon Roberts said the company expected to see customer shopping patterns normalise over the coming months.
‘We are focused on offering our customers even better value and regularly creating new and exciting products for them to try,’ he said.
‘From today we are reducing prices by £50 million on everyday products from strawberries and cherries to bacon and potatoes, helping customers make the most of this summer.’
Bank of America commented: ‘Online sales were up 29% and +142% on a two years stack. It overall means that Sainsbury should retain a significant part of the operating leverage experienced in 2020 at a time Covid-related costs should reduce. It bodes well for profit.
‘Overall, Sainsbury delivered a good start of the year and better than Tesco relatively (though not exactly the same period).
‘The company is reinvesting the benefits of stronger sales growth to improve its value proposition. Sainsbury is going to invest a further £50 million (as announced yesterday) in targeted price reductions. This is encouraging.’
