Sainsbury’s profits set to beat expectations after strong Christmas

Sainsbury’s said the second English national lockdown in November and subsequent tiering in December helped sales soar, meaning profits for the year are now likely to be £50 million higher than first thought.

The unplanned profit upgrade was revealed as supermarket bosses said sales in the three months to January 2 were up 8.6% on a like-for-like basis.

Over the Christmas period itself – measured by Sainsbury’s as the nine weeks to the same date – these were even higher, growing 9.3%.

The like-for-like measure does not include the permanent closure of 120 standalone Argos stores which were not reopened after the first national lockdown in March. On a total basis, sales during the three-month period were up 6.8%.

Sainsbury’s said there was strong growth in both its grocery stores and at Argos, which remained open for click-and-collect orders, alongside huge surges in online deliveries.

Argos sales rose 8.4% and non-food sales were up 6% as non-essential retailers were forced to either close stores or only offer click-and-collect services.

Online grocery sales jumped 128% over the period, with total digital sales up 81%, representing 44% of total sales for the group.

Around 1.1 million online food orders were delivered in the 10 days leading up to Christmas, the grocer added.

As a result, underlying pre-tax profits for the year are expected to hit £330 million, compared with previous guidance of £270 million – although this will be down on the £586 million recorded last year due to Sainsbury’s agreeing to pay its £410 million business rates bill.

Chief executive Simon Roberts said the tighter Christmas restrictions saw customers turn to smaller turkeys and an increase in lamb and beef sales, but shoppers treated themselves to more premium products.

He said: “While people had smaller gatherings, they still treated themselves, with Taste The Difference sales up 11%.

“Premium champagne sales were up 52%, Taste The Difference party food was popular throughout December, and people did more home baking than usual, with mincemeat sales up 24%.

“Customers still wanted New Year’s Eve at home to feel special and we sold a record number of steaks.”

Mr Roberts added: “Argos sales were up over 8%, with fast-track home delivery and click and Collect beating expectations for Black Friday and Christmas.”

The supermarket declined to reveal how its 800 convenience stores have performed, but confirmed overall sales in those sites had fallen.

Central London stores have seen the worst performance, but there has been an increase in sales and bigger basket sizes in sites in residential areas. The company did not reveal how badly overall sales fell.

Since the introduction of a third national lockdown in England, the boss also revealed absence levels are lower than they were in March but are starting to rise.

He said: “We’re very much making sure we’re putting all the policies in place to support colleagues who need to shield at home.”

He added: “At the moment we’re averaging around 8%. That’s where we are today. We’ve seen a step up in the last few days.”

Bosses also called on the Government to use Covid-19 to hold a major review of business rates, but fell short on demanding the Treasury extend a business rates holiday beyond April to support struggling high streets.

Mr Roberts said: “We’ve long held the view that business rates need to change. The Government have committed to do a review, and we fully encourage and support it. Covid has to be the catalyst for a change in the way business rates have been working.

“A business rates review is absolutely critical and very important.”