Sainsbury profits from rivals' misfortunes

Sainsbury's continues to beat expectations: another set of strong results suggests it's winning the sales war...

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Last Updated: 06 Nov 2012

Sainsbury reported another impressive set of half-year results today, as it continues to confound the sceptics who thought it might get squeezed out in a downturn. The supermarket chain said total sales were up 7.6% to nearly £11bn in the six months to October 4, pushing pre-tax profits up to £272m – a 13.3% increase on last year, and right at the top end of forecasts. Better still, like-for-like sales (which strips out new openings and so on) were up 3.9% on last year, which is better than most of its rivals. So it’s clearly tempting customers away from the likes of M&S and Waitrose…

CEO Justin King ascribed Sainsbury’s success to its ‘universal customer appeal’: in other words, the supermarket is trying to cater for a range of different budgets, from its cheap-and-cheerful Basics range to the higher-end ‘Taste the Difference’ stuff. The idea is that customers can economise in some areas and keep spending on others – all under the same roof. ‘Customers are now buying a different mix of products and we have successfully developed our offer to help offset the rising cost of living and tighter household budgets,’ King said today. And judging by the fact that Sainsbury’s is now doing 18m transactions a week, he appears to be right.

Indeed, King’s ‘Making Sainsbury’s Great Again’ recovery plan continues to impress: the company has now delivered 15 consecutive quarters of sales growth. The prevailing wisdom was that mid-market retailers like Sainsbury’s would get squeezed from both sides in a spending slowdown – but according to market researchers TNS, it’s actually maintaining market share despite the aggressive expansion of discount stores like Aldi and Lidl. And sales growth of 3.9% is actually better than Tesco managed in the first half.

Sainsbury was predictably cautious about the outlook for the coming months, suggesting the economic environment would ‘remain particularly challenging’. But judging by today’s results, it’s got as good a chance as anyone of surviving the turmoil. Food sales are holding up well, its joint venture with British Land will allow it to squeeze more value out of its property assets, and it’s continuing to develop its non-food offering (and a Deloitte report out today suggests more of us will be using supermarkets to do our Christmas shopping).

In fact, so bullish is Sainsbury’s that it’s even signed up loveable TV twosome Ant & Dec to join Jamie Oliver for its Christmas advertising. So if retail sales dry up, they can always try and make a bit of money from phone-ins.


In today's bulletin:
Sainsbury profits from rivals' misfortunes
Jobless total hits 11-year high
Christmas isn't cancelled after all
Tory boost as SMEs blast the government
MT's Little Ray of Sunshine: Sloping off for the winter

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