Sainsbury's sticks to guidance as H2 profit rises

Sainsbury's stuck to its full-year guidance as the supermarket group reported a 23% increase in first-half profit boosted by higher grocery sales and cost cuts.

Underlying pretax profit for the six months to 18 September rose to £371m from £301m a year earlier as group sales increased 5.9% to £17.53bn. Excluding fuel, like-for-like sales rose 0.3% but weaker general merchandise trading caused a 1.4% dip in the second quarter.

Sainsbury's reiterated its guidance for underlying pretax profit of at least £660m for the year to the end of March. The interim dividend was unchanged at 3.2p a share.

The FTSE 100 company said it increased market share as grocery first-half sales rose 0.8% to £11.3bn. Sales of general merchandise, which includes Argos, dropped 5.8% to £3.1bn from a year earlier when shoppers were buying household goods during lockdowns. General merchandise sales fell 11.4% in the second quarter.

Clothing sales rose by one-third to £0.5bn as people returned to work and school and fuel sales increased by 63% as petrol prices increased and motorists returned to the roads.

Sainsbury's said it cut costs by scrapping 37 standalone Argos stores in the first half, closing food counters and introducing more self-checkout tills. The company said it was confident about dealing with supply-chain problems and a shortage of workers exacerbated by Brexit.

Simon Roberts, Sainsbury's chief executive, said: "We are making good progress delivering our plan to put food back at the heart of Sainsbury's. Our industry faces labour and supply chain challenges. However our scale, advanced cost saving programme, logistics operations and strong supplier relationships put us in a good position as we head into Christmas."

Sainsbury's shares fell 3% to 280.1p at 08:45 GMT. The stock had gained about 25% in 2021 before Thursday's update, powered partly by takeover speculation.

Independent retail analyst Nick Bubb said: "Full-year profit guidance is maintained but the City may be picky about the decline in Q2 sales, particularly in non-food and Argos."