Sainsbury’s increases profit outlook as it puts food ‘at the heart’

Supermarket giant Sainsbury’s has boosted its earnings outlook thanks to soaring grocery sales as it focused on keeping food costs down for cash-strapped customers.

The grocery chain and Argos owner said it held underlying pre-tax profits firm at £340 million in the six months to September 16 in the face of rising costs and intense competition on prices across the sector.

On a statutory basis, pre-tax profits fell 27% to £275 million from £376 million a year ago, when results were buoyed by income from a legal settlement.

The group reported a 6.6% rise in like-for-like retail sales, excluding fuel, in its second quarter, down from growth of 9.8% in the first three months, as its performance was hit by a difficult performance for its clothing range.

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But it said full-year underlying pre-tax profits are now expected to be in the “upper half” of its guidance, at between £670 million and £700 million, as efforts to keep prices low boosted grocery sales.

It previously guided for annual profits of £640 million to £700 million, having delivered £690 million in 2022-23.

Total grocery sales jumped 8.9% in the second quarter and 10.1% over the first half, according to the firm.

Chief executive Simon Roberts said: “Food is firmly back at the heart of Sainsbury’s.”

He added: “We know people are still finding things tough and we’re working harder than ever to reduce our costs, putting the money back into our customers’ pockets through lower prices on the products they buy most often.

“I’m pleased to say food inflation is coming down and we are passing savings on to customers.”

Looking ahead to the all-important Christmas season, the group said “strong trading momentum has continued in recent weeks and we are confident heading into the peak trading period”.

The half-year figures showed that the strong grocery performance was partially offset by a tough market for general merchandise and clothing, with the latter plunging 14.6% in the second quarter as a cooler summer and warm early autumn affected demand for seasonal clothing ranges.

General merchandise sales were 2.6% lower in the second quarter, but this was pared back to a decline of 0.6% when stripping out the hit from the closure of Argos in Ireland.