- First quarter sales up 4.9%
- Highest market share since 2016
- Full year guidance reiterated
Supermarket chain Sainsbury’s (SBRY) reported 4.9% revenue growth for the 16 weeks to 21 June as the grocer registered its highest market share in nearly a decade with like-for-like sales excluding fuel up 4.7%, the highest in a year.
Despite the strong trading update, the shares traded 3.3p or roughly 1% lower in early dealings as investors focused on the cautious profit outlook, specifically comments on the ‘second half’ weighting versus the prior year.
Nevertheless, the grocer appears to be operating well against an increasingly competitive backdrop with its Taste the Difference fresh food sales up 20%, boosted by the sunny weather.
‘We have great momentum and are well set to deliver another strong performance over the summer,’ enthused CEO Simon Roberts.
REDISCOVERING ITS MOJO
Grocery sales increased by 5% with convenience and online up 6% apiece, while clothing was up 8%, driven by a 13% jump in womenswear and general merchandise, including the Habitat label was up 4.2%.
The Argos chain reported a sales increase of 4.4% with volumes up 6% to 7% as it benefited from the spring weather, notching up consecutive quarters of rising sales.
Shore Capital analysts Clive Black and Darren Shirley commented: ‘The sustained nature of Sainsbury’s share gains has both surprised and pleased us in competitive market.’
‘All in, we can foresee ongoing steady EPS (earnings per share) progress, now a little more assisted by the buyback, a strong income stream, perhaps with cover building a little, and good resilience for equity investors in times that are a little too changeable for comfort,’ added the analysts.
Looking ahead Sainsbury’s said it continues to expect to deliver full year retail underlying operating profit of £1 billion and retail free cash flow of more than £500 million.
SHOTS ACROSS THE BOW
Investment analyst Dan Coatsworth at AJ Bell commented: ‘Rival supermarkets will be looking at Sainsbury’s performance with some concern.
‘If Sainsbury’s is doing well, it means other grocers might not be doing as well. Sainsbury’s is taking market share and that means rivals will need to pull their socks up. This is a highly competitive industry and grocers need to be on their toes at all times.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (Steven Frazer) of the article own shares in AJ Bell.
