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Sainsbury’s has upped its profits expectations for the year after reporting a record Christmas.
Grocery sales increased 7.1% year on year over the festive period, while Argos also boosted sales by 7.1% in the six weeks to 7 January and clothing sales rose 5.1%.
Total like-for-sales across the third quarter jumped 5.9%, which the supermarket put down to higher prices and also “relatively resilient volume trends”.
Grocery sales rose 5.6% in the 16 weeks to 7 January as the World Cup provided a boost and customers started shopping for Christmas early, with general merchandise 4.6% higher year on year. The GM performance represented a marked improvement over a year ago when sales declined by 16%.
Sainsbury’s said its volume performance was ahead of the market for the third consecutive year, driven by investment in prices, innovation, service and availability.
The stronger volume trends led the group to raise its profits expectations for the year to the upper end of its guidance range of £630m to £690m, despite the recent pay increase for staff announced last week.
The retailer added it expected to generate free cashflow of about £600m for the year, ahead of previous forecasts for at least £500m.
CEO Simon Roberts said the supermarket delivered the best possible Christmas for customers as millions of households managed their budgets differently.
“We prioritised keeping our prices low and giving our customers great value at Christmas,” he added.
Roberts said he understood that money would be “exceptionally tight” this year, particularly as many await Christmas bills.
“We are working together with our suppliers to battle cost inflation and we’re keeping prices low again this year with our biggest value campaign yet in January, price matching Aldi on around 300 of our most popular products.”
Sainsbury’s highlighted fresh food products as a key driver of Christmas sales and said it outperformed rivals on meat, fish and poultry, and fruit and vegetables.
Own-label sales grew by 10% year on year, with the entry level product range the fastest growing sub-brand.
It added that its Taste the Difference range outperformed premium own label ranges at bigger rivals, with sales up 10% year on year as customers treated themselves over Christmas.
Taste the Difference mince pie sales increased 22%, while panettone sales jumped 49% and champagne and prosecco sales hit record levels.
Shares in Sainsbury’s sank by 3% to 238.5p as markets opened this morning, with Tesco down 0.8% to 240.2p.
Morning update
Revenues at Nichols have increased 14% to £164.9m over 2022 as the Vimto owner continued to see a recovery in the out-of-home market from pandemic lows.
Out-of-home sales jumped by 43% year on year, but growth slowed to 5% in the second half as trading normalised and the cost of living crisis took its toll.
The group said in the full-year trading update that the Vimto brand continued to perform well in the UK and overseas.
Despite the ongoing inflationary pressures, Nichols expected to report pre-tax profits in line with forecasts.
“The group has a proven, diversified, and international business model,” Nichols said in the update. “However, it is not immune to the significant and accelerating inflationary pressures impacting the wider consumer and soft drinks markets.
“Whilst FY23 will be a challenging year as cost of living pressures impact consumer demand across all routes to market, the group will continue to seek to mitigate these pressures through both cost efficiency and revenue management.”
Nichols also announced the appointment of Elizabeth McMeikan as its next non-executive chairman.
She will initially join the group as a non-executive director on 1 Feburary before taking on the role of chairman on 26 April when John Nichols retires at the AGM.
McMeikan brings a wealth of consumer-focused public and private company experience to the board from a number of non-executive board roles, further to an executive career spent with Colgate Palmolive and Tesco.
Her current board positions include senior independent director at Unite Group, non-exec at Dalata Hotel Group, senior independent director at McBride and senior independent non-exec of Custodian REIT. She also previously held senior independent director roles at FTSE 250 pub group JD Wetherspoon and Flybe.
McMeikan will become a member of the nomination, remuneration and audit committees following her appointment to the Nichols board, chairing the nomination committee.
John Nichols will remain on the board as a non-executive director, taking the second of the two Nichols family board positions, sitting alongside fellow non-exec James Nichols.
Nichols said: “Following a thorough search process, in Liz the nominations committee have identified an outstanding candidate to take over as the group’s next chair.
“She has significant experience in consumer-facing businesses and public company boards, which I am very confident will be of great value to the group. Liz will join the board in February, enabling a smooth transition before taking over as non-executive chair following the group’s 2023 AGM.”
McMeikan added: “Nichols plc is an outstanding business with a proud history and exciting future prospects.
“I am both delighted and honoured to be given this opportunity to take over as the company’s next chair. I look forward to joining the company and working closely with my new colleagues to contribute to the group’s continued, sustainable success.”
The FTSE 100 opened 0.4% higher to 7,723.71pts this morning.
Early risers included THG, up 4.2% to 59.3p, McBride, up 3.9% to 24p, PayPoint, up 3.4% to 519p, M&S, up 2.7% to 145.1p, and Just Eat Takeaway, up 2.5% to 2,083.5p.
Virgin Wines UK, Science in Sport and Britvic are down 3.7% to 70.3p, 3.6% to 13.5p and 2.9% to 745.6p respectively.
Yesterday in the City
The FTSE 100 fell back 0.4% to 7,695.66pts yesterday.
There wasn’t much market news to drive stock movements on Monday, but Sainsbury’s shares slipped 1% to 244.6p ahead of this morning’s results.
Tesco also declined 0.6% to 241.8p, while M&S stayed broadly flat at 141.1p and Ocado sank 2.5% to 722.6p.
Other fallers included Bakkavor, down 3.4% to 97.6p, Virgin Wines UK, down 3.7% to 70.3p, and British American Tobacco, down 3.8% to 3,160p.
McBride, Science in Sport and Naked Wines were among the risers, up 4.6% to 22.9p, 3.6% to 14.5p and 3.8% to 137.4p.
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