Optimistic Sainsbury's lifts its profits outlook after sales turnaround steadies the ship
Supermarket chain Sainsbury's increased its profits forecast yesterday after sales shot up across the UK.
The retailer, which operates 13 stores across Northern Ireland, delivered some welcome news for the under-pressure supermarket sector as it increased its outlook for the year following narrowing falls in sales.
According to an update from Sainsbury's yesterday, the chain saw a 1.1% drop in like-for-like second-quarter sales, excluding fuel - its seventh quarter of falling sales in a row.
But the decline was better than the 2.1% fall seen during the previous three months, and Sainsbury's said it had seen the number of sales and transactions rise.
It added that lower average basket spends in had continued to stabilise.
The group now expects full-year profits to be moderately ahead of the £548m expected in the City, although this is still a sharp fall from the £681m reported the previous year. Adding to the problem, a study released earlier this week showed the rise of Lidl was hampering Sainsbury's performance here.
According to the latest figures from Kantar Worldpanel, Sainsbury's saw customer sales in Northern Ireland drop by 2.8% in the year to September 13. Tesco, meanwhile, suffered a 1.2% fall during the same period.
The Big Four supermarkets have been squeezed amid a fierce price war as they fight back against the increasing popularity of discounters.
But Sainsbury's said it was buoyed by its turnaround programme of price cuts and promotions, with better-than-expected sales and cost savings during the second quarter of the year. Mike Coupe, chief executive of Sainsbury's, added: "While the market is clearly still challenging, with food deflation impacting many categories, we are making good progress on delivering our strategy."
Shares in the supermarket leapt as much as 14% higher after the profits upgrade and better-than-expected second-quarter sales performance.
Sainsbury's said its total sales had edged 0.3% higher in the 16 weeks to September 26, with volumes also around 1% higher.
The form posted a 4% rise in sales by volume of its premium Taste The Difference range and said it was seeing the benefits of its plan to improve more than 3,000 own-brand products.
Mr Coupe, who took over from long-standing predecessor Justin King last July, unveiled a wide-ranging plan to fight back in November, which included price cuts to 1,100 items and an overhaul of its own brand.
But he said in the group's latest update that the market would remain challenging, with no respite from the damaging food price inflation that has hit the sector in recent years until at least the early part of next year or beyond.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said that, despite the supermarket chain's bullish update, "the size of the task ahead remains evident".
"Quite apart from the ferocity of the competition, Sainsbury's is up against food deflation, changing consumer trends and margin pressure," he added.
But analysts at Bernstein said the update suggested a "more benign trading environment", and Kantar Worldpanel added that Sainsbury's was the only one of the major players to hold its market share steady, at 16.2%, in the 12 weeks to September 13.