Sainsbury’s profits to beat targets after bumper Christmas

Sainsbury’s has said it is on track to beat profit targets on the back of better-than-expected food and drink sales as the rise of the Omicron variant boosted supermarkets.

The UK’s second-largest grocer said overall sales dropped in the latest quarter but highlighted that sales of grocery products grew over the key period around Christmas.

It told shareholders on Tuesday morning that strong recent grocery sales volumes and cost savings across the business have offset the impact of “higher operating cost inflation” and investment into the business.

The retailers reported that total sales, excluding fuel, dropped by 5.3% for the latest quarter to January 8 against the same period last year, but were 1.4% ahead of pre-pandemic levels.

Grocery trading dipped by 1.1% against the same period last year, but was 6.6% higher than pre-pandemic levels.

Sainsbury’s was buoyed by grocery sales over the Christmas period, which increased by 0.1% year-on-year over the six weeks to January 8.

The company said this was boosted by its efforts to keep prices lower for customers, which included matching around 150 prices with Aldi in its “price match” campaign.

Meanwhile, the retailer reported that sales in its general merchandise business, which includes Argos, dropped by 16% over the quarter.

However, it said cost reductions at Argos, driven by the group’s decision to shut 420 of the brand’s branches, helped strengthen its profit margins.

Sainsbury’s said it is now expected to post a pre-tax profit of at least £720 million for the year to March.

Simon Roberts, chief executive of Sainsbury’s, said: “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.

“The backdrop was challenging and our teams worked hard throughout the year to make sure we had all of the products everyone wanted.”

Mr Roberts said the retailer has reported increased absences in recent weeks due to the spread of the Omicron variant, but absence rates were still “only half” of the peak rates the company saw during the pandemic.

He added that Sainsbury’s will continue to pay all staff during isolation due to Covid-19, following Ikea’s decision to cut sick pay for unvaccinated staff affected by the virus.

Shares in the supermarket group moved 3.1% higher to 288p in early trading.