Sainsbury's ups profit forecast after record Christmas

Sainsbury's had a good Christmas with help from Argos Shutterstock

Sainsbury's had a good Christmas with help from Argos Shutterstock

United Kingdom supermarket chain J Sainsbury PLC on Wednesday lifted its annual profit guidance after strong end to the year, with Argos delivering a particularly strong performance on Black Friday.

With Britons under pressure from slow wage growth compounded by higher inflation, company updates and survey data this month show they cut back on nearly everything other than food purchases in the run-up to Christmas.

Sainsbury's said it now expects to achieve between £80-85mln of EBITDA by March 2018, ahead of its previous guidance of £65mln.

Argos Fast Track collection was by 39 per cent in the 15 weeks to 6th of January compared to past year, while delivery rose by 25 per cent, helping it achieve record Black Friday sales.

The retailer's full-year underlying profit before tax is now expected to be "moderately ahead of the published consensus" of £559 million, published on 5 January.

Sainsbury's did not break down the separate like-for-like sales performances of its supermarket and Argos businesses.

Lidl said on Wednesday that it had enjoyed another record December, with sales up 16% on the same period previous year though the fast-expanding chain did not publish a like-for-like comparison based on the stores that were already open in 2016.

Coupe said Sainsbury's still won market share in general merchandise and clothing despite the "challenging conditions".

Total grocery sales were up 2.3 per cent, with online grocery sales rising 8.2 per cent and convenience growing by 7.3 per cent.

The positive trading update comes a day after Kantar Worldpanel said Sainsbury's market share had dropped to 16.4% from 16.7%.

The weaker performance is Argos is in stark contrast to a year ago when the catalogue retailer turbo-charged the group's Christmas sales with revenue growth of 3.7%. German discount retailers, Aldi and Lidl, were both up 17%.

Third quarter like-for-like (LFL) sales excluding fuel rose 1.1%, an improvement on the 0.6% seen in Q2.

But Sainsbury's added that sales in its general merchandise arm, which includes Argos, fell 1.4 per cent.

Chief executive Mike Coupe said the business enjoyed a "strong Christmas week" with record sales and more than 340,000 online grocery orders, as well as "stellar growth" in Argos fast-track delivery and collection.

Mr Coupe said that customers bought more of the supermarket's higher-end "Taste the Difference" range this Christmas period than last, seemingly treating themselves despite generally feeling the squeeze of higher inflation.

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