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Sainsbury’s (SBRY) CEO Mike Coupe has insisted the supermarket is making “good progress in challenging conditions” despite a double-digit fall in first half underlying profits and a 1% drop in like-for-like sales.
Sainsbury’s underlying for the six months to 24 September were up 2.1% to £13.9bn, but these were “broadly flat” excluding the impact of its Argos acquisition which added £281m (including VAT) to the total.
Like for like sales excluding fuel were down 1% during the period, but the supermarket reported like-for-like transaction number growth across all channels - supermarkets, convenience and groceries online - and total volume growth.
Underlying profit before tax dropped by 10.1% to £277m as “sustained food price deflation” impacted margins.
However, statutory profit before tax of £372m was up 9.7% as a result of a £95m profit recognised outside of underlying results - mainly due to property profits and the sale of the Pharmacy business to LloydsPharmacy.
Chief exec Mike Coupe commented: “Two years ago we set out our strategy to make our customers’ lives easier, offering great quality and service at fair prices, serving our customers whenever and wherever they want. We have made good progress delivering this in challenging market conditions.”
“The acquisition of Home Retail Group accelerates our strategy to give customers choice, convenience, speed and flexibility in when, where and how they shop. Food will always be at our heart and we are strengthening our Clothing, General Merchandise and Financial Services offers to realise the potential of the Group. The combination of our products, services, customer data and fast delivery networks gives us a strong platform for growth and enables us to deliver clear synergies.”
He added that Sainsbury’s was on track to deliver its three-year £500m cost saving programme by the end of 2017/18 and also aims to deliver £500m million of cost savings over three years from 2018/19.
Net debt reduced by £485m from March 2016 to £1.3bn.
However, a “significant fall in discount rates since the year-end” has increased the Sainsbury’s pension scheme deficit (net of deferred tax) to just under £1.1bn - an increase of £674m since the year-end - with the acquired Home Retail Group pension scheme deficit standing at £249m.
Sainsbury’s shares have opened 5.6% down at 240.7p.
Morning update
It’s difficult to get away from the sensational news this morning that Donal Trump looks to have swept to a stunning victory in the US Presidential race overnight.
The markets have reacted less than enthusiastically to President Elect Trump, with the FTSE 100 crashing 1.8% on opening before quickly recovering to trade around 0.4% down at 6,843pts.
After the US’ very own version of Brexit, the dollar has plunged in value against a basket of currencies, with the pound back up the pound rose 1.2% against the dollar to $1.253 with more gains expected through the week.
In the US Dow Futures were down more than 4% as the election news unfolded, while Japan’s Nikkei dropped by as much as 6% during the night.
Elsewhere on the markets this morning Carlsberg has upgraded its 2016 earnings after seeing solid continuing growth in the third quarter.
It reported third quarter net revenue of DKK 17.5bn, which represents 1% organic growth in the quarter and 3% for the first nine months of the year.
Its price/mix improved by 1% in the quarter while volumes were flat. In the year to date price/mix has increased 4% but volumes are down 1%.
Carlsberg said it now expects to see organic operating profit growth of around 5% for the full-year of 2016, ahead of previous expectations of low-single digit percentage growth.
CEO Cees ‘t Hart said: “We’re satisfied with our Q3 results. Our value management approach, which targets the optimal balance between market share, gross margin and earnings, continues to progress well. In addition, our Eastern European business delivered a good set of results in the quarter, ahead of our expectations. Consequently, we upgrade our 2016 earnings expectations.
“We continue to see good momentum across the organisation in Funding the Journey and good progress in the operationalisation of the SAIL’22 priorities in our business plans for 2017 and future years.”
On the UK markets, other than Sainsbury’s major fallers include TATE & Lyle (TATE), down 4.3% to 715.5p, Marks & Spencer (MKS), down 2.4% to 322.9p and Tesco (TSCO), down 1.6% to 198p.
Risers include Hilton Food Group (HFG), up 1.6% to 609.5p, PayPoint (PAY), up 1.1% to 1,102p and Hotel Chocolate (HOTC), up 0.9% to 254.9p.
Yesterday in the City
The FTSE 100 was up 0.5% to 6,843.1pts yesterday as the markets prepared for what was widely thought to be Hillary Clinton’s ascent to the Presidency of the US. The blue-chip index was up by 2.2% since Monday morning on the notion Clinton was set to prevail.
There were contrasting fortunes for two FTSE 100 consumer giants yesterday after both Associated British Foods (ABF) and Marks & Spencer (MKS) issued results.
ABF surged up 5.8% to 2,633p after it increased revenues and profits in the past year as Primark continued its rapid expansion, the sugar business improved and grocery achieved growth.
M&S sank by 5.2% back to 331p as its underlying profits plummeted 18.6% in the 26 weeks to 1 October to £231.3m as clothing and home sales declined further.
Imperial Brands fell3% to 3,689p after it increased full-year net tobacco revenues 9.7% to £7.2bn despite overall volumes slipping 3% as its growth brands performed strongly.
Risers during the day included SSP Group (SSPG), up 1% to 341.1p, Fever-Tree rose another 1.7% to 1,100p and Diageo rose 0.9% to 2,091p.
Fallers included McBride (MCB), down 2.5% to 178.5p, Premier Foods (PFD), down 3.3% to 44.25p, Cranswick (CWK), down 1.5% to 2,188p and Greggs (GRG), down 1.4% to 920p.
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