J Sainsbury PLC ups profit guidance after strong Christmas

J Sainsbury PLC (LSE:SBRY) raised its profit forecast for the current financial year after Coronavirus (COVID-19) concerns prompted shoppers to stock up on food and drink to celebrate a ‘stay at home’ Christmas.

Grocery sales rose 0.1% year-on-year in the six-week Christmas period to 8 January 2022 and were 6.8% higher than two years ago, before the COVID-19 pandemic, the supermarket chain said in a trading statement.

It lifted its profits guidance for the year to March 2022 to £720mln from £660mln previously.

“Our expectations for full-year profits are ahead of previous guidance, with investment in the customer proposition and higher operating cost inflation offset by structural cost savings and stronger-than-expected grocery volumes, driven in part by increased in-home grocery consumption,” the grocer said.

Third-quarter grocery sales fell 1.1% year-on-year, but grew by 6.6% on the two-years-ago period.

Total retail sales excluding fuel declined by 2.9% year-on-year in the six-week Christmas period and were 5.3% lower in the third quarter.

Online grocery sales fell by 16.5% in the third quarter, as shoppers returned to physical stores, but were nearly double the level of two years ago.

Although general merchandise and clothing sales declined in the third quarter, against an “exceptional” performance in the previous year, profits from these product areas are in line with expectations, reflecting improved margins and lower costs, Sainsbury’s said.

It added that financial services profit expectations are ahead of consensus forecasts with bad debts lower than expected and lending volumes starting to recover.

“I am really pleased with how we delivered for customers this Christmas. More people ate at home and our significant investment in value, innovation and service led to market share growth. At the same time, we are pleased to increase profit guidance for the full year,” commented Sainsbury’s chief executive Simon Roberts.