Sainsbury's profits increase 7.1%
Sainsbury's has hailed the success of its price-matching scheme as it delivered a better than expected rise in annual profits.
The UK's third largest supermarket, which has more than 1,000 stores, said underlying profits increased 7.1% to £712 million in the year to March 17, beating City forecasts for a 5% rise.
The group said overall sales excluding VAT rose 5.6% to £22.3 billion, taking its market share to the highest level for nearly a decade at 16.6%. It was helped by its Brand Match price scheme, which guarantees to match Asda and Tesco on 14,000 branded goods.
However, the chain, which opened 73 Local convenience stores last year as part of 1.4 million sq ft of new space, said it will slow its rate of store expansion from just over 7% to about 5% in the current financial year.
The group's profits growth represents a slowdown on the 9% increase a year ago but is still much better than Tesco, which recently suffered its first fall in UK profits for 20 years, while Morrisons last week posted its first fall in like-for-like sales in seven years.
The supermarket price war has gathered intensity in recent months after Asda launched a guarantee to be 10% cheaper than rivals, while Tesco staged its £500 million Big Price Drop campaign.
But Sainsbury's Brand Match scheme, launched in October, coupled with its Live Well For Less advertising campaign, has helped it out-perform the grocery market. Like-for-like sales excluding fuel but including VAT were up 2.1%, helped by a strong final quarter.
Chief executive Justin King said: "We are succeeding by understanding what our customers want, supporting and inspiring them to Live Well For Less. Brand Match, combined with our use of coupons at the till, has improved Sainsbury's price perception whilst retaining the benefits of our heritage in quality and service." Chairman David Tyler said the results represented a good sales and profit performance.
The group has seen strong growth in its own-label ranges, with its premium Taste The Difference lines up 8.2%. Its Basics range grew 6.8%, driven by sales of store cupboard essentials and ingredients for cooking, making it the second biggest supermarket value brand, it claimed.
Sainsbury's is currently halfway through a revamp of its core By Sainsbury's range, with 3,700 new or improved products. Its clothing and general merchandise ranges are growing faster than its food business, helped by new ranges by TV fashion guru Gok Wan. Internet business grew 20%, making Sainsbury's the fastest growing online food retailer, with sales of £800 million, while its convenience store business is also growing ahead of the market.