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Highlights
- Sales Growth: Sainsbury's achieved a 4.6% increase in total sales, with grocery sales up by 5.0%, though General Merchandise and Argos experienced declines.
- Retail Profit Growth: Retail underlying operating profit grew by 3.7%, driven by strong grocery performance and increased contributions from Sainsbury’s and Nectar.
- Outlook: Sainsbury’s expects continued profit growth for the full year, with retail operating profit forecasted to rise by 5-10%.
J Sainsbury Plc (LSE:SBRY) has reported strong financial results for the 28 weeks ending 14 September 2024, with a notable performance in its grocery division helping to offset declines in General Merchandise, Clothing, and Argos. The retailer’s total sales (excluding fuel) grew by 4.6%, driven primarily by a 5.0% increase in grocery sales. However, the company faced a decline in General Merchandise & Clothing sales, which fell by 1.5%, and Argos saw a 5.0% drop in sales. Additionally, fuel sales decreased by 4.4%, reflecting a challenging external environment.
Retail like-for-like sales, excluding fuel, rose by 3.4% in the period, with Q1 growth of 2.7% and Q2 growth of 4.2%. This performance was underpinned by strong grocery volume growth and a robust contribution from Sainsbury’s own-label products and Nectar loyalty program, which helped to offset weaker performance in Argos. As a result, retail underlying operating profit increased by 3.7%, reaching £503 million. The operating margin for Sainsbury’s grocery business improved by 20 basis points compared to the previous year, reflecting the efficiency gains from increased grocery sales.
Sainsbury’s Financial Services division also showed positive momentum, with underlying operating profit rising by 38% to £18 million. However, the retailer reported a statutory profit after tax of £76 million, down 51% year-on-year, largely due to non-underlying items related to restructuring in the Financial Services division, which amounted to £176 million in post-tax charges.
The company’s strong operational performance helped it generate retail free cash flow of £425 million in the first half of the year, with expectations to exceed £500 million for FY 2024/25. Additionally, Sainsbury’s has already completed £150 million of its £200 million share buyback program, with the remainder expected to be completed in the second half of the financial year.
Looking ahead, Sainsbury’s remains confident about its full-year performance. The retailer expects its retail underlying operating profit for the year to be between £1.01 billion and £1.06 billion, marking growth of 5-10%. This projection is supported by continued grocery volume growth, a stronger performance from Argos in the second half, and the delivery of ongoing cost-saving initiatives. Additionally, the total underlying operating profit from Financial Services, including discontinued operations, is now expected to be between £15 million and £25 million, an improvement on the previous forecast.
The company also reiterated its guidance of at least £500 million in retail free cash flow for the full year, providing further confidence in its ability to deliver strong financial results in FY 2024/25. With the grocery segment performing well and strategic actions underway to bolster other areas of the business, Sainsbury’s is positioned to maintain its positive trajectory throughout the remainder of the financial year.
