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Sainsbury’s has posted first quarter like-for-like growth of 9.8% as pricing and a return to grocery volume growth boosted revenues.
Like-for-like sales (excluding fuel) were up 9.8% in the 16 weeks to 24 June, with total retail (ex fuel) sales up 9.2%.
Sainsbury’s said it saw continued strong grocery momentum in the period, reflecting its investment in value, innovation, service and availability.
Grocery sales growth of 11% was driven primarily by a return to volume growth, helped by a particularly strong performance over bank holidays and warmer weather towards the end of the quarter.
Growth was led by its convenience stores and supermarkets, as customers continued to return to stores. Market share gains were driven by the further improvement its our value proposition, including the launch of Nectar Prices in April, and continued investment in availability and service.
Sainsbury’s also said it remained “determined focus on maintaining our improved value position”, reinvesting cost savings and the benefit of higher volumes to offer customers value and “consistently inflating behind key competitors”.
It said it led the industry on passing lower cost prices through to customers on the food and household products they buy most often, with prices on our top 100 selling products now lower than they were in March
General merchandise sales were up 4%, with Argos sales up 5.1%.
Argos sales continued to benefit from consistently strong availability in mobiles, tablets and gaming consoles and ongoing demand for energy saving products. Strong consumer electronics sales more than mitigated weaker early summer seasonals performance.
Clothing sales, though, were down 3.7%, impacted by the cooler weather, with stronger sales in the later weeks of the quarter as the weather improved.
The group’s outlook for the full financial year remains unchanged, with FY23/24 underlying profit before tax expected to be between £640m and £700m and to generate at least £500m of retail free cash flow.
CEO Simon Roberts commented: “We are putting all of our energy and focus into battling inflation so that customers get the very best prices when they shop with us, particularly now as household budgets are under more pressure than ever.
“Food inflation is starting to fall and we are fully committed to passing on savings to our customers. Since March, we have invested over £60m in lowering prices, leading on price cuts across more than 120 essentials like bread, butter, milk, pasta, chicken and toilet roll. Prices on our top 100 selling products are now lower than they were in March, against a market where prices have gone up. Customers have also saved over £90 million since we launched Nectar Prices in April.”
“Customers can see that prices at Sainsbury’s have improved and this combination of great value and some good weather in recent weeks means we have grown our food volumes and market share. Customers are choosing us when they want to celebrate and we grew ahead of the market over Easter, the Coronation and the bank holidays.
“Our colleagues are so important to delivering leading standards of customer service and we continue to do everything we can to support with the cost of living. Colleagues tell us how much they appreciate the free food in stores, distribution centres and contact centres and we have now extended this indefinitely as well as offering additional discounts to help save money over the Summer.”
Sainsbury’s shares are down 1.6% this morning to 270.3p despite the strong first quarter growth.
Morning update
Wholesler Kitwave Group has posted a 52% jump in operating profits, despite inflationary pressures.
In the six months to 30 April 2023, the group posted revenue of £275m, up from £223.3m last year, resulting in an increase in operating profit to £10.2m from £6.7m.
The Group’s gross profit margin increased to 21.6% from 19.8%, representing both margin improvements within divisions and the fact that a higher proportion of group revenue is generated by the foodservice division compared to the same period as last year, due to acquisitions.
Excluding the acquisition of WestCountry revenue grew by 17% and adjusted operating profit by 46% compared to H1 2022.
However, the group’s cost base has been affected by inflationary pressures, with the majority of increases being reflected in labour and delivery-based costs. It is expected that these cost pressure increases will ease over time, as the group anticipates lower levels of fuel pricing and lower wage inflation compared to the last 18 months.
Its retail and wholesaler division saw combined revenue increase by 15% to £194.2m, performing ahead of expectations during the period.
The division benefitted from the continued focus on gross margin improvement and operational efficiency, which together generated an improvement in its operating profit percentage compared to last year.
Its Foodservice division was boosted by the acquisition of Westcountry Food Holdings in December 2022, adding to the of acquisition of M.J. Baker Foodservice earlier in the year.
The division saw revenue increase by 49% to £80.7m. Excluding the acquisition of WestCountry, revenue increased by £13.7 million representing 25% growth, which includes the whole period effect of M.J. Baker.
Overall, the division traded ahead of expectations for the period, as customer numbers and volumes have not to date been materially impacted by the cost-of-living crisis. The demand for affordable socialising and eat-out occasions coupled with the defensive nature of care homes and volumes from educational establishments have served to maintain customer numbers and volumes.
Kitwave added that trading since the period end has continued to be ahead of expectations, through a combination of strong order volumes, sustained commodity price inflation and continued operational cost control to improve gross margins.
CEO Paul Young commented: “We are pleased to report continued strong progress across the Group in the six months ended 30 April 2023. With trading in the wholesale sector typically weighted towards the second half of the year, we are confident that this positive momentum will continue throughout 2023, and results for the full financial year will be ahead of market expectations that were established at the start of the financial year.
“”A significant highlight during the period was the Group’s successful acquisition and integration of WestCountry into our Foodservice division, where we are now able to deliver high-quality fresh produce throughout the South West. This acquisition demonstrates the strong results that can be achieved when taking advantage of the considerable opportunities available in the UK’s fragmented wholesale market.
“We believe that our unwavering focus on operational efficiency, strategic investments, and customer satisfaction, means we are well placed to drive sustainable growth, both organically and through acquisitions to deliver value for the group and its shareholders.”
Eleswhere today, PZ Cussons is hosting a capital markets event later today for investors and analysts on the progress made at Childs Farm, the market-leading baby and child personal care business, which it acquired in March 2022.
The presentation will include details on the progress of the business under PZ Cussons’ ownership and the growth opportunities ahead.
PZ Cussons believes that through continued expansion in the UK, leveraging the Group’s brand-building and commercial expertise, and with international expansion, it can triple revenue in the business over the next five years.
Sarah Pollard, PZ Cussons Chief Financial Officer, said: “We are really proud of the continued development of Childs Farm under our ownership and excited about the growth we see ahead for this unique business. As we look ahead, we see opportunities to accelerate Childs Farm’s progress and strengthen its leadership position, to enter new international markets and to continue to launch innovative new product ranges.
“As a brand, Childs Farm is highly complementary to our strategic focus on the Baby category, an attractive and growing market, and worth £3.5bn in retail sales across our priority markets alone. Our success today in growing Childs Farm reflects our winning formula for brand building, a key part of our wider strategy as we continue to transform the business.”
On the markets this morning, the FTSE 100 is flat at 7,529.6pts.
Risers include McBride, up 5.8% to 27.5p and Glanbia, up 5.1% to €13.75.
Fallers include Wynnstay, down 3.6% to 450.6p, Cranswick, down 1.5% to 3,214p and Marks & Spencer, down 1.1% to 193.7p.
Yesterday in the City
The FTSE 100 opened yesterday down 0.1% to 7,527.3pts.
Risers included Ocado, back up 6% to 601.8p amid takeover hopes that have yet to be firmly put to bed.
Also on the up were Naked Wines, up 4.8% to 98.9p, Just Eat Takeaway.com, up 4.5% to 1,262p, Science in Sport, up 4% to 13p, Greencore, up 3.8% to 75.9p, THG, up 3.7% to 84.5p and Deliveroo, up 3.6% to 118.6p.
Tesco was up 1.5% to 252p after the announcement of its new chairman over the weekend.
Fallers included Glanbia, down 3.4% to €13.08, B&M European Value Retail, down 1.8% to 547.2p, McBride, down 1.7% to 26p and PayPoint, down 1.6% to 475p.
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