The UK’s third-largest supermarket operator Sainsbury’s has signalled that its recovery is well on track, reporting a 60% surge in underlying first half pre-tax profit, which rose to GBP189m (US$359m).
The results come as Sainsbury’s hits the halfway point of its three-year turnaround plan, which aims to see sales increase to GBP2.5bn by 2008.
“We have now delivered GBP1.3bn of additional sales after 18 months, which is just over halfway towards our target to grow sales by GBP2.5bn by March 2008. Over the same period, our market share has increased with weekly customer transactions growing 1.5m as we have introduced better quality products, lowered prices, and improved product availability and customer service,” Justin King, the group’s chief executive, said.
Reported pretax profit for the six months ended 7 October, including one-off items, reached GBP194m. Total sales rose 8.3% to GBP9.6bn. With same store sales rising by 6.2%, King said that the higher sales were the result of price cuts and an increased emphasis on fresh, healthy food.
“We have made good progress during the first six months of the year reporting our seventh consecutive quarter of like-for-like sales growth, our best performance for many years,” King said.
“A strong performance on food together with good performances from online and non-food have driven higher sales densities, which are up by 5.6%. At the same time we have realised cost savings, delivered operational gearing and increased the retailing operating margin by 37 basis points.
“We believe that our focus on healthy, safe, fresh and tasty food is becoming increasingly important for customers. We expect the market to remain highly competitive but our first half performance gives us good momentum as customers continue to look for better quality products at competitive prices,” King concluded.
The retailer raised its interim dividend by 11.6% to GBP0.024 per share.
Looking to the second half, King said price competition remained “vigorous”. He said that the second half would be a “steep curve” due to tough comparables with last year, but reiterated his goal to achieve growth of 3-3.5%.