Britain’s second biggest supermarket group, J Sainsbury, posted annual pre-tax profits up 14% to £627m (US$917m) today [Wednesday], beating analysts’ expectations of £618-625m and keeping pace behind sector leader Tesco.
For the 52 weeks to 30 March, revenue rose by 7.4% to £18.2bn on a comparable asset basis, and UK supermarket sales were up 6.3% on a like-for-like basis. Earnings per share were up 14% to 21.5p. Overall pre-tax profits rose by 31% to £571m.
“It is over a decade since the company experienced this level of growth and this momentum is giving us confidence that our recovery is sustainable,” said Sainsbury, adding that the growth, coming after two years of decline, was a result of the start of a three-year recovery programme designed to win back customers. A high profile television advertising campaign starring celebrity chef Jamie Oliver buoyed sales, as did wider product ranges, improved customer service and expensive store improvements.
CEO Peter Davis said: “We have now completed the first full year of our recovery programme and I am pleased to report strong progress on delivering our promises.”
Davis added that to drive growth further he would target northern England and the midlands by revitalising its Savacentre brand that “sells good food but not necessarily as much fancy food”.
Sainsbury had raised its cost savings target by £100m to £700m by March 2004 having exceeded cost reduction targets by £10m in 2001/02. A decade ago the chain had market-leading margins of about 7%, and it said that it wants to regain these, but it is too early to say when that could happen.
Operating profit at Sainsbury’s Bank meanwhile grew by 66% to £22m, including a one-off credit of £3m relating to VAT. “We have aligned our Bank business more closely with our supermarket customers,” said chairman Sir George Bull, who added that a major programme has been launched to modernise the chain’s supply chain through a network of highly automated depots around the country.
Sainsbury’s to You, the second-largest player in the UK online grocery market, posted annual sales of around £110m. “We expect this business to be profitable in the second half of 2003/04,” said Bull.
Its US subsidiary Shaw’s Supermarkets, the twelfth largest food retailer in the US, produced a good performance. Fifty stores were improved and 17 stores purchased from Grand Union were integrated. The chain also re-badged a further eleven Star Market stores to increase its presence in Vermont and Connecticut.
“We continue to look for suitable acquisition opportunities both in, and adjacent to, New England,” said Bull: “Our US and UK businesses are working well together on developing and sharing benefits and synergies. We have stimulated the two-way flow of knowledge and ideas between Shaw’s and Sainsbury’s, a good example being the use, in the UK, of some fresh produce merchandising ideas from the US.”
Sainsbury has acknowledged that growth has slowed since the start of its new financial year, due to tougher comparatives. It remains confident however of meeting market expectations for the year.
The chain has proposed a final dividend up 5% to 10.82p, the first increase in three years.