Shares in supermarket Sainsbury’s (SBRY) added 1% to 207p after results for the first half showed the firm continuing to grow its food sales ahead of the market.

Like-for-like sales excluding fuel were down 1% in the six months to 21 September, while grocery sales were down 0.1% on an organic basis as customers ‘responded to lower prices and new value brands’.

The most recent Kantar grocery market survey showed Sainsbury increasing its total sales by 0.6% in the 12 weeks to 6 October while the rest of the ‘big four’ supermarkets registered negative growth.

However, heavy investment in its stores meant that pre-tax profits for the half fell by 91% to £9m against £107m a year ago.

PRICE CUTS TO WOO CUSTOMERS

Since the failed attempt to merge with rival Asda, chairman Mike Coupe has focused on lowering prices to lure in customers which for now appears to be working.

However, rather than looking forward to the key Christmas season he admits that the market ‘remains highly competitive and the consumer outlook remains uncertain’, almost the stock refrain of most retailers nowadays.

In line with Tesco (TESCO), Sainsbury’s has phased out its Basics range in favour of ‘heritage’ brands which play on the firm’s 150-year history, although mindful of the threat from the discounters it is introducing what it calls ‘entry price point’ products to attract shoppers on tighter budgets.

Sales in its supermarkets were down by 0.7% but convenience revenues were up 7% showing that the food-on-the-go market still offers plenty of growth potential.

There was no change to full-year forecasts which, as Clive Black of Shore Capital observes, means the outlook is basically ‘constrained’. Moreover, as flagged at the capital markets day in September, Sainsbury’s is ‘seeking to operate its business in a disciplined manner, suggesting sideways earnings momentum in future years’, adds the retail analyst.

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Issue Date: 07 Nov 2019