Sainsbury’s has predicted that its full year profits will come in ahead of expectations, sounding an upbeat note in the beleagured supermarket sector.
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Sainsbury’s has shown greater resilience to the rise of German discounters Aldi and Lidl than its big four rivals, market leader Tesco, Wal-Mart’s (WMT.N) Asda and Morrisons, helped by the continued expansion of its convenience store estate.
On Wednesday, China produced a few rare optimistic data, as consumer sentiment rose to its highest level in over a year, according to media reports (http://www.cnbc.com/2015/09/29/china-consumer-sentiment-at-16-month-high-as-households-ignore-stock-slump.html).
“We do still harbor a particular concern that should (Tesco) “get its act together”, then Sainsbury may be particularly vulnerable to attrition”, said Shore Capital analyst Clive Black.
The supermarket, once famed for its Jamie Oliver ads, is pursuing a more lowkey marketing plan that’s underpinned by a mid-to-low pricing strategy created to curb its reliance on promotions and take it closer to the discounters that have rapidly risen to establish retail’s status quo. When fuel was included, total sales were down by 1.8% and like-for-likes down by 3.3%.
Consequently, sales from stores open a year or more dropped 1.1 per cent in the second quarter, which is not as steep a drop as the 1.3 per cent analysts had predicted.
Referring specifically to the Q2 results, Sainsbury’s chief executive, Mike Coupe (pictured above), said there had been an improvement in the group’s key trading metrics.
Collins, who placed his sell rating under review, said data supplied by Kantar Worldpanel suggests Sainsbury gained customers from Tesco over the summer.
The supermarket has turned towards having lower regular prices, and reducing the amount of special offers it gives. Groceries online orders grew at over 15% and it increased the number of Click & Collect sites to 52.
“This is the first time we’ve seen a United Kingdom supermarket company guide up profits for a long time”, Richard Clarke, an analyst at Sanford C. Bernstein, said by phone.
Sainsbury’s also announced it had opened 27 convenience stores during the quarter and that clothing sales had been up almost 13%.
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“Sainsbury’s is doing better than even they expected…”
