- Grocery spending offsets slump in non-food
- Record sales of alcohol over Jubilee weekend
- Full year pre-tax profit target maintained
Shares in supermarket Sainsbury’s (SBRY) inched up 2p to 211p after the firm posted an unexceptional first quarter trading update but kept to its full year profit guidance.
Sales for the 16 weeks to late June were saved by the Jubilee weekend, which saw Brits splurge on everything from cream teas to Pimms and champagne, offsetting a weak performance in non-food products.
PARTY TIME
Chief executive Simon Roberts will no doubt have been thanking his lucky stars for the Platinum Jubilee when he read the till rolls for the first quarter.
Thanks to street parties up and down the country and customers splashing out on scones and clotted cream, washed down with record sales of beer, wine and spirits, grocery sales for the period were only 2.4% lower than the previous year.
The firm’s up-market Taste the Difference brand saw sales jump 12% over the Jubilee weekend, while weekly booze sales were the highest ever outside of Christmas and Easter.
Online grocery sales were another bright spot, with revenues over 90% above pre-pandemic levels and the group holding onto customers it gained during lockdown.
The firm said its Aldi Price Match and Quality campaigns were driving growth in secondary customers or those who do a secondary shop at Sainsbury’s while doing their primary shop at other stores.
SQUEEZE ON CONSUMERS
Non-food sales fared less well, however, with in-store sales down 14.6% and Argos sales down 10.5%, although the first five weeks of the quarter were lapping an extremely strong period last year.
For the 16 weeks to 25 June, the UK’s second-largest grocer by market share posted an overall 4.5% drop in total sales excluding fuel.
‘The pressure on household budgets will only intensify over the remainder of the year,’ said Roberts, repeating his promise to invest up to £500 million to lower prices over the two years to next March.
‘We're working hard to reduce costs right across the business so that we can keep investing in these areas that customers care most about,’ he added.
OUTLOOK UNCHANGED
Critically, despite fears of a slump in consumer spending, the firm stood by the profit guidance it gave in April of underlying profits before tax of between £630 million and £690 million, to the relief of analysts and investors.
Analysts at house broker Shore Capital said they were ‘pleased and relieved’ to be keeping their financial forecasts as Sainsbury’s navigates an increasingly challenging trading environment.
On their current estimates, however, they believe Sainsbury’s shares ‘appear to be too lowly rated’ even in the face of more rate rises and consumer uncertainty which they believe are ‘more than fully factored in’.
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