Sainsbury’s (SBRY) shares have risen by more than 13% in early trading after upgrading its full-year profit forecast this morning.
The supermarket said that sales and cost savings were both ahead of expectations and, should that trend continue, it now expects full-year underlying profit before tax to be “moderately” ahead of its £548m forecast.
The shares have rocketed up by 14.1% at the time of writing to 261.2p, wiping out the falls of the past month. Sainsbury’s shares had dropped by around 15% since mid-July, closing last night at 229.3p.
Sainsbury’s said this morning that sales volumes and transaction numbers grew in the second quarter “as customers value our lower regular prices”.
Chief exec Mike Coupe said; “During the quarter we saw an improvement in our key trading metrics. 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.
Despite the positive trading momentum, Sainsbury’s like-for-like sales were 1.1% down in the second quarter excluding fuel and 3.3% down including fuel.
Total Retail sales for second quarter up 0.3% (ex fuel), down 1.8% in total.
Taste the Difference volume grew by over 4%, Sainsbury’s said, and clothing grew by nearly 13% in the quarter after launching its Tu website nationwide during the quarter.
“The first six weeks of (Tu) trading significantly exceeded our expectations and the majority of customers are choosing to collect their orders in store,” Coupe said.
“As we continue to reduce our promotional activity in favour of lower regular prices, we are improving the accuracy of our demand forecasting,” Coupe added. “This is driving better availability and lower than expected levels of waste [and] also results in even better product freshness which supports our commitment to quality.”
David Gray, analyst at Planet Retail, commented: “Sainsbury’s remains one of the best among a bad bunch –Asda and Morrisons being way behind on like-for-like performance. It also has some key attributes that will stand it in good stead going forward – a sizeable and growing convenience business, fewer very large hypermarkets than its rivals and a still-effective loyalty scheme in Nectar.”
John Ibbotson, director of Retail Vision, added: “”My bet is that a much leaner Sainsbury’s will be around in 2020, unlike some of its competitors. These marginally better than expected numbers are proof of its ability to resist.
“In fairness to Mike Coupe, Sainsbury’s has made the right decision in cutting the dividend, store openings and capital outlay, and this will all help if the money is ploughed back into prices.”