UK: Sainsbury’s half-year profits at top end of City forecasts after further rise in sales

Sainsbury’s today reported a half-year profits haul of £400million after its share of the grocery market rose to the highest level in a decade.

The chain, which operates more than 1,100 supermarkets and convenience stores, said the performance for the 28 weeks to September 28 was up 7% on a year ago.

Sainsbury’s has been the only one of the big four supermarkets to grow its market share amid pressure from discounters Aldi and Lidl.

It now accounts for 16.8% of the market, having achieved 35 consecutive quarters of underlying sales growth. Own-brand sales are growing at twice the rate of branded goods and the supermarket’s Taste the Difference range has seen double-digit growth.

The company added 393,000 square feet of new space through six supermarkets, 50 convenience stores and two extensions, meaning overall half-year sales were 4.4% higher at £13.9billion.

Stripping out new store space, sales rose by 1.4% on a year earlier, although the chain expects this rate to come under pressure as it faces tougher comparables with a year earlier.

Chief executive Justin King also warned that customer budgets remain tight and that the economic recovery may take time to translate into stronger household confidence.

The half-year profits figure was at the top end of City forecasts. Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Without question, this is a strong performance from a resurgent Sainsbury, even though clouds remain on the investment horizon.”

He warned that intense competition, commodity prices and the company’s sole UK focus limited its scope for further expansion.

The company is on track to meet its full-year target for one million square feet of new space but said a review of its property pipeline has identified some sites where it no longer wants to build a supermarket. This resulted in a one-off write-down of £92m in today’s results.