J Sainsbury PLC said that like-for-like sales including fuel for the third quarter of fiscal 2022 rose, but upgraded its full-year market expectations on lower costs, market-share growth and higher grocery volumes during Christmas.
The U.K. grocer said like-for-like sales excluding fuel fell 4.5% in the 16 weeks ended Jan. 8. Like-for-like sales including fuel rose 0.6%, it said.
Sainsbury’s, the UK’s second-largest supermarket chain by market share, reported grocery-led sales growth for the festive season covering the six weeks to 8 January – when compared to the same pre-pandemic period in 2019/20.
Total grocery sales fell 1.1% in the third quarter, with general merchandise sales declining 16% and clothing sales falling 2.7%. Fuel sales, on the other hand, increased 48% in the period, it said.
The FTSE 100 listed company has upgraded its underlying pretax profit expectations for the year ending March to at least 720 million pounds ($981.6 million), up from its previous reported guidance of at least GBP660 million.
The company said Argos continued to benefit from stronger margins supported by transformational operating cost reductions and that its financial services profit expectations are running ahead of consensus.
Nevertheless, the group – which includes Argos – said it now expected to report underlying profit before tax of at least £720m for its financial year to March 2022. That sum is more than double the £356m it made in its last 12-month period.”
The revised figure was up from the £660m it forecast last July.
It said of the revision: “Our expectations for full year profits are ahead of previous guidance, with investment in the customer proposition and higher operating cost inflation offset by structural cost savings and stronger than expected grocery volumes, driven in part by increased in-home grocery consumption.”
Sainsbury said its debt-reduction target is currently expected to be achieved ahead of schedule.
“Our bold investments in value, new products and service have driven volume market share gains, growing ahead of the market through the third quarter and the key Christmas period over one and two years,” Sainsbury said.
The company added that full price clothing sales were up 38% versus two years ago – and 2% higher on 2020/2021 thanks to reduced markdowns and promotions.
Argos sales were more than 9% down in the wider third quarter compared to the same period last year while the supermarket chain’s general merchandise performance was 20% lower.
Total retail sales were 5.3% down on the same three months in 2020/21.
Its six-week festive performance does not compare favourably to discounters Aldi and Lidl, who both reported surging sales over their respective Christmas seasons.
However, neither of the discount chains provide data on comparable sales covering existing sites so much of their growth may have come from new store openings.
Both have pledged to have the lowest prices this year as shoppers’ budgets come under severe pressure from energy bill-led inflation – already at a decade high.
It represents another price challenge to the established chains which are all desperate to maintain their market shares.
Sainsbury’s said it was now matching Aldi prices on 150 of its highest volume fresh food products and putting over 2,000 lines into a Price Lock promise so customers can be certain they are getting great value.
Chief executive of Sainsbury’s, Simon Roberts, told investors: “I am really pleased with how we delivered for customers this Christmas.
“More people ate at home and our significant investment in value, innovation and service led to market share growth.”
Shares rose by 3.1%.
Ross Hindle, analyst at Third Bridge, said: “Despite many expecting the discounters to flourish in the face of food inflation pressures, our experts don’t expect Sainsbury’s to be easily caught out.”
He added: “December’s trading was particularly strong for UK supermarkets, with home working translating into home eating and fewer consumers dining out as Omicron swept the country.
“There is now plenty of evidence to suggest the UK’s grocery renaissance is here to stay. Sainsbury’s should be able to hold on to its gains thanks to its loyal customer base and innovation around product lines, however it would be remiss not to highlight the threat the discounters and rapid-delivery grocers pose, particularly to Sainsbury’s.”