Sainsbury’s food sales rise 5% in first half

Britain’s second-largest supermarket chain has reported a strong first half driven by an increase in food sales and market share.
J Sainsbury reported a 5 per cent rise in total food sales over the period, but this was offset by the group’s struggling Argos business.
Simon Roberts, chief executive, said: “Our food business is going from strength to strength and we’re making the biggest market share gains in the industry, with continued strong volume growth.”
The food division outperformed the wider British grocery market with a market share rising to 15.2 per cent. It trails only Tesco. Sainsbury’s has grown its customer numbers and eaten into its rivals market share, including that of Morrisons and Asda.
Shoppers splashed out more on food and sales of Sainsbury’s premium Taste the Difference range rose 18 per cent over the half.
“Increasingly with the cost of eating out more customers want to eat in at home, treat themselves and trade up. That’s one of the big reasons why we are seeing Taste the Difference grow so strongly,” Roberts said.
Roberts, 52, who has led Sainsbury’s since June 2020, has focused on making its food business the priority, closing loss-making Argos high street outlets, stripping out counters and investing in lowering prices through the chain’s Aldi price-match programme and Nectar prices.
He said the company had benefited from its focus on lower prices during the first half and a growing number of customers were coming to the group for their weekly shop. It estimates that out of its customers who do the majority of their shopping at Sainsbury’s 25 per cent of them are new to the chain.
Retail sales excluding fuel over the first half of the year rose to £16.3 billion, up 3.1 per cent from £15.8 billion over the same period last year, boosted by its grocery business. Headline pre-tax profits rose 4.7 per cent to £356 million in the six months to September 14. At a statutory level pre-tax profit, which excludes discontinued operations, fell 52 per cent to £131 million from £275 million.
Roberts said that the company had focused on investing in its product range in an attempt to encourage customers to shop at Sainsbury’s.
“We’ve added more new products — 600 new products — into our convenience stores. We’ve added the Aldi price match and I think what you see overall is more and more customers trusting our offer and doing more of their shopping with us,” he said.
Growth in the grocery business was weighed down, however, by a weak performance from the retailer’s general merchandise division in the first half of the year. Sales at Argos declined 5 per cent during the six months to September 14. The company said the fall in sales was largely due to tougher-than-anticipated trading conditions in the first quarter and a slow start to the summer.
The FTSE 100 company has also invested in AI and automation to help it to reduce food waste and anticipate customer demand. “We now use Blue Yonder, which is a platform which means we can much more accurately forecast what we send to each of our stores and that has the benefit of making sure that our availability has got better,” Roberts said.
He also called on the government to take note of concerns raised by farmers regarding the decision in last week’s budget to cut inheritance tax relief on agricultural assets: “They’re working incredibly hard to make sure they can provide food that everyone wants to buy that is British-produced and I would urge the government to work closely with farmers to make sure they listen to their concerns because we need a resilient, successful productive food system.”
The company is hopeful of a strong festive period, with sales of its Christmas clothing range already selling well and customers buying gifts earlier in the year. “Our food ordering has got off to a really strong start this Christmas and again that really points to customers thinking about their most important food shop of the year early,” Roberts said.
The retailer maintained its full-year profits, forecasting underlying operating profit of between £1.01 billion and £1.06 billion for the year ahead, representing growth of 5 to 10 per cent.
Clive Black, an analyst at Shore Capital, said: “They have made really robust all-round progress right across the proposition … Sainsbury’s has materially improved its core value credentials and that is starting to be reflected in customer perception and customer satisfaction.”
Sainsbury’s shares fell 6p, or 2.2 per cent, to 261¾p.
Weaker revenues at Argos weighed on Sainsbury’s first-half performance as unseasonable summer weather and online challenges hampered customer purchases.
Retail sales at Argos fell 5 per cent in the six months to September 14 to £2.3 billion, with a weak first-quarter performance putting pressure on the business.
The FTSE 100 company said that profit margins at its Argos division had been affected by a decline in sales, which resulted in a rise in promotional activity and discounting on its seasonal products, such as outdoor furniture.
“The normal big summer peak that happens in May and June on summer products just didn’t happen this year and that held back the first quarter,” Simon Roberts, chief executive of Sainsbury’s, said.
The business added that consumer caution over big-ticket purchases had affected demand from shoppers and changes to how customers accessed the websites of large retailers also held back sales.
The group said, however, that Argos’s performance in the second quarter and the first few weeks of the third quarter had strengthened. The business also expects to report a stronger performance in the second half of the year as customers shop for festive gifts.
“We’re going to be making sure we do the very best job for customers this Christmas and Black Friday as we look to really drive our performance on the back of an improving trend,” Roberts said.
Clive Black, an analyst at Shore Capital, said that “a perfect storm” had hit sales at Argos during the first half of the year. “They took quite decisive action in the second quarter. They marked down and cleared a lot of stock and second quarter sales were much stronger than in quarter one. I think they’re into more positive and confident territory now,” he said.