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Sainsbury’s (SBRY) has this morning raised its expectations for pre-tax profits for the year as volumes and transactions grew in the second quarter.

In a trading update which should provide some cheer for the beleaguered sector, CEO Mike Coupe said the decline in average basket spend in supermarkets continued to stabilise in the 16 weeks to 26 September.

However, rising volumes still led to a 1.1% decline in like-for-like retail sales – down 3.3% including fuel – as the deflationary environment and brutal price war continued to take their toll. Analysts had predicted a bigger fall of between 1.2% and 1.3%.

Total retail sales for the second quarter were up 0.3% excluding fuel and down 1.8% with petrol included.

“During the quarter we saw an improvement in our key trading metrics,” Coupe said. “Both volume and transactions grew as the decline in average basket spend in supermarkets continued to stabilise. Whilst the market is clearly still challenging, with food deflation impacting many categories, we are making good progress on delivering our strategy.”

He added that the level of promotional activity had decreased in the period in favour of a focus on lower regular prices.

Sainsbury’s online order grew at more than 15% in the quarter, with the number of click & collect sites growing to 52. The supermarket also opened 27 convenience stores in the past three months.

“Year-to-date we have traded well, with both sales and cost savings ahead of expectations,” Coupe said. “Should current market trends continue, we expect our full year underlying profit before tax to be moderately ahead of our published consensus.”

Morning update

Shares in Sainsbury’s rocketed when the markets opened as investors rushed to welcome Mike Coupe’s optimistic statement. The stock is up 11.6% to 255.6p. The good news – the first for some time – also carried Tesco, up 4.2% to 178.5p, and Morrisons, up 5.6% to 164.8p, up alongside Sainsbury’s.

Away from the supermarkets, Zambeef, the AIM-listed agribusiness with operations in Zambia, Nigeria and Ghana, said its revenues for the year ended 30 September will be lower than market forecasts as a result of the continued depreciation of the Zambian Kwacha against the US Dollar. However, the improvement in gross profit margins will push operating profits and net cash inflow from operating activities above expectations. Joint CEO Carl Irwin said: “In line with the group’s strategy, it is pleasing to note that gearing has reduced significantly following the disposal of Zamanita Ltd. Furthermore, driving the cold chain food products through the retail network will continue to be a key focus”.

English sparkling wine producer Gusbourne made a loss of £726k in the six months to 30 June, compared with £516k a year ago, as expected thanks to finance charges and investment in the business. “These planned losses continue to be in line with expectations and the long-term development strategy of the group,” Gusbourne said. Sales were broadly unchanged at £190,000, reflecting the limited stock availability of earlier year vintages. The group started construction of a new winery building during the first half to increase production and planted 76 acres of vineyards planted in May to bring the total acreage under vine to 232 acres. CEO Ben Walgate said: “I am delighted with the continued progress of the company in line with our long-term development plan, including operational expansion and the continued development of the Gusbourne brand. The production of premium quality wine from new vineyards is, by its very nature, a long-term proposition. With the rigorous standards that we employ it is an eight year cycle from planting a vine to selling the finished product.”

Yesterday in the City

Tesco (TSCO) was in a rare position yesterday as one of the biggest risers on the FTSE 100 as its shares jumped 3.1% to 171.3p. The supermarket was joined by Sainsbury’s (SBRY), which ended the day 1.4% up to 229.3p, ahead of today’s Q2 trading update. Morrisons (MRW) also managed to nudge upwards by 0.4% to 156.1p on a good day for the listed grocers.

The leading index of shares failed to make any gains despite mining giant Glencore rebounding 17% after a sell-off. The FTSE 100 slipped another 0.6% to 5,922.7 points.

Elsewhere, AIM-listed butcher Crawshaw (CRAW) slipped back 1.1% to 71.71p. The stock had already made gains ahead of the interim results showing revenues growing 42% to £16.7m.

Other fallers included McBride (MCB), down 4% to 149.3p, Imperial Tobacco (IMT), down 3.1% to 3,334p, and Poundland (PLND), down another 2.6% to 272p.