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Sainsbury’s has posted an uplift in underlying annual profits and forecast another rise in profits in the current financial year as its core grocery business wins market share and it delivers cost savings.
Updating the markets on its performance in the year to 2 March, Sainsbury’s said its overall retail sales (excluding fuel) were up 6.8%.
This was driven by strong performance in its core grocery sales, which were up 9.4% for the year, reflecting strengthening volume growth as inflation reduced, particularly in the second half of the year, and its continued investment in price.
Helped by its launch of Nectar Prices, Sainsbury’s saw volume increases across all major categories and own brand participation increased 93 basis points.
General merchandise sales were up 1.2%, but down 0.5% overall due to the closure of Argos in the Republic of Ireland and a decline in seasonal and kids, home and furniture sales due to a cooler, wetter summer and warmer winter impacting seasonal sales,
Retail underlying operating profit rose 4.3% in the period to £966m, with volume-driven grocery profit growth and continued strong delivery of cost savings partially offset by weaker Argos and general merchandise profits.
Underlying profit before tax was up 1.6% to £701m, while statutory profit before tax fell by 15.3% to £277m due to one-off charges related to the restructuring of its financial services division.
In its 2024 financial year, Sainsbury’s expects retail underlying profits to grow by another 5%-10% to £1.01bn-£1.06bn on continued grocery momentum, growth in Nectar profit contribution and a “resilient” Argos profit performance amid cost saving delivery.
Sainsbury’s cautioned it will face tougher grocery comparatives this year, but expects to continue to generate volume growth and outperform the market, helped by more normal summer weather.
However, it expects a lower profit contribution from financial services amid a withdrawal from loss-making banking products.
CEO Simon Roberts commented: “We said we’d put food back at the heart of Sainsbury’s and that’s what we’ve done. Our food business is firing on all cylinders. We have the best combination of value and quality in the market and that’s winning us customers from all our key competitors, driving consistent volume market share growth as more customers choose us for their weekly shop and all their special occasions.
“We’ve done that by relentlessly investing in price: £780m over the past three years. We know it’s still tough out there for so many households and we’re doing all we can to save money right across our business to keep prices low – we have reduced 4,000 products over the last year alone. Nectar Prices has also been a game-changer for customers, saving them £12 on a typical £80 shop. And we’re not compromising on quality: we’ve doubled our rate of innovation and Taste the Difference is performing especially well.
“As we embark on our Next Level Sainsbury’s strategy, we’ll continue to make deliberate, balanced choices to support our customers, colleagues, communities and farmers. I want to say a big thank you to all our colleagues and suppliers for all their hard work in delivering another record year. The business has real momentum and we’re excited by our goal of making good food joyful, accessible and affordable for everyone, every day.”
Sainsbury’s shares have opened down 2.1% on the news to 262.4p.
Morning update
Unilever has posted organic sales growth of 4.4% in its first quarter, with the sales uplift balanced between volume growth and pricing.
Underlying volume growth increased to 2.2% from 1.8% in its fourth quarter of 2023, while underlying price growth of 2.2% continued to fall, down from 2.8% in the previous quarter.
The consumer giant said its ‘power brands’ continued to perform strongly with 6.1% underlying sales growth, underpinned by volume growth of 3.8%.
Divisionally, beauty & wellbeing was the standout, with underlying sales up 7.4% amid volume growth of 5.6%.
Personal care grew 4.8% with 1.4% from volume despite a particularly strong prior year comparator. Homecare underlying sales increased 3.1%, with 4.3% volume growth more than offsetting the negative price growth reflecting commodity cost-driven deflation in some markets.
Nutrition grew underlying sales by 3.7%, with volumes returning, down 0.4% from a 1.1% decline in the fourth quarter, while ice cream grew by 2.3% led by price as volumes fell 0.9%.
Emerging markets grew underlying sales 5.4%, with 3.9% from volume, while underlying sales in developed markets grew 3%, with volumes almost flat at a 0.3% decline.
In Europe, underlying sales growth was 4.0%, driven by price. Volume declined 1.5%, but sequentially improved with a return to volume growth in the UK, France and eastern Europe, as price growth continued to moderate from the peak in mid-2023.
Overall turnover was up 1.4% to €15bn as growth was moderated by a 2% hit from currency and 0.9% from disposals net of acquisitions.
CEO Hein Schumacher commented: “Unilever delivered improved volume growth in the first quarter. This was driven by our power brands which saw underlying sales growth of 6.1%, with strong performances from Dove, Knorr, Rexona and Sunsilk.
“We are implementing the Growth Action Plan at speed, focused on three clear priorities: delivering higher-quality growth, creating a simpler and more productive business, and embedding a strong performance focus. This is underpinned by our commitment to do fewer things, better and with greater impact.
“In March, we announced the separation of ice cream and the launch of a comprehensive productivity programme. These actions will drive focus and faster growth, and reduce costs. Dedicated project teams are progressing the work at pace.
“Unilever’s transformation is at an early stage, but we have increasing confidence in our ability to deliver sustained volume growth and positive mix as we accelerate gross margin expansion.”
Elsewhere on a busy morning, Nestlé has reported modest growth in its first quarter as volumes declined at the start of the year.
The world’s largest food group posted organic growth of 1.4% in the first quarter, with pricing up 3.4% and volumes down 2% in the period.
The group said performance impacted by soft consumer demand, particularly in North America, and the temporary supply constraints for vitamins, minerals and supplements.
Overall, organic sales growth was driven by Europe and emerging markets, with a negative impact from North America.
Total reported sales were CHF22.1bn, a decrease of 5.9% as foreign exchange hit sales by 6.7% and M&A reduced group sales by 0.6%.
Despite the weak first-quarter sales performance, Nestlé confirmed its full-year 2024 outlook, with organic sales growth expected to improve to around 4% and a moderate increase in the underlying trading operating profit margin.
Mark Schneider, Nestlé CEO, commented: “We had expected a slow start and see a strong rebound in RIG in the second quarter with reliable delivery for the remainder of the year. A wide range of growth initiatives across the Group are now starting to deliver.
“In North America, we have stepped up our innovation intensity and commercial activities, primarily in frozen food, which lost ground in the first quarter. The integration plan for Nestlé Health Science’s vitamins, minerals and supplements business is on track, with the turning point expected in the second quarter and strong growth thereafter.
“Nestlé’s top priorities remain to execute with excellence, leverage our science and nutrition expertise and drive growth with our billionaire brands. We reiterate our 2024 guidance and look ahead with confidence.”
WH Smith has posted flat profits on strong travel growth in its first half.
Total revenues for the six months to 29 February were up 8% to £926m, on travel revenues up 13%.
Travel in the UK was up 15% year on year, North America up 13% and rest of the world up 24%.
However, overall performance was dragged back by a 4% drop in sales from its high street stores.
Headline group profit before tax and non-underlying items was £46m from £45m a year ago as Travel trading profit rose £3m to £50m and high street profits fell £2m to £24m.
WH Smith said it continues to invest in growth, with 80 stores to open in Travel, including 50 in North America. Overall it expects to open a further 110 Travel stores in the current financial year.
It added that it has made a “good start” to the second half of its financial year, with trading momentum continuing ahead of the peak summer period.
CEO Carl Cowling said: “The group is in its strongest-ever position as a global travel retailer. We have had a good first half and our businesses are well positioned for the peak summer trading period. Total Travel revenue is up 13%. The board is today announcing an interim dividend of 11.0p reflecting current trading and the significant medium and long-term prospects for our global travel business.
“Our Travel divisions are trading well and I am particularly pleased with the outstanding performance from our UK Travel business which has seen a 19% increase in trading profit. We continue to make excellent progress in this division, growing our space and broadening our categories as we transition to a one-stop-shop for travel essentials.
“The second half of the financial year has started well, and we are on track to deliver full-year expectations. We are confident that 2024 will be another year of significant progress for the group.”
UK and global Coke bottler Coca-Cola Europacific Partners has posted comparable growth of 5.3% in the first quarter of 2024.
Comparable volumes were up 2% in the period, despite a decline in its core European territories.
Europe volumes were down 1.4% as solid in-market execution offset by strategic de-listings of water and Capri-Sun and cycling strong comparables.
Australia/Pacific and Southeast Asia saw collective volume growth of 8.1% on strong momentum in Australia and New Zealand, and an encouraging start to the year in Indonesia supported by an earlier Ramadan.
Away-from-home sales were up 2.8% in the period, despite a 4.6% drop in Europe.
In-home sales were up 1.3%.
Comparable revenue per unit case was up 3.4%, reflecting positive headline pricing and promotional optimisation, partly offset by geographic mix.
Pricing in Europe was up 5.6% amid price increases in France and Iberia while APS was up 0.2% as strong growth in the Philippines (which is at a lower revenue per unit case) hit mix.
CEO Damian Gammell said: “We have had an encouraging start to the year reflecting great brands and great execution. All delivered by great people, to whom we extend our sincere thanks, alongside our customers and brand partners.
“Our first quarter delivered good volume and revenue growth despite cycling strong growth in Europe albeit more than offset by a great start to the year in APS, especially in the Philippines. This demonstrates how our diversity makes us a stronger and more robust business, operating in categories that remain resilient despite ongoing macroeconomic and geopolitical volatility.
“Although our first quarter has set us up well for the rest of the year, it is typically our smallest. We are building on this momentum supported by fantastic activation plans, including the Paris Olympics and the UEFA Euros, to engage customers and consumers. We remain focused on driving profitable revenue growth, to actively manage our pricing and promotional spend to remain affordable and relevant to our consumers, alongside our focus on productivity and free cashflow.”
French spirits giant Pernod Ricard was delivered a “robust performance” in its third quarter, with net sales down but improving despite weakness in North America and China.
Overall third quarter net sales returned to flat in the quarter and down by 2% on a reported basis.
Both those figures are an improvement on the organic net sales decline of 2% over the first nine months of the financial year and a 6% drop in reported sales.
The group said this “robust performance illustrates the strength of our diversified portfolio of premium international spirits and our broad-based geographic footprint covering mature and emerging markets”.
This mitigated the impact of slower performance in China, due to a difficult macroeconomic environment and in the US, as trade inventory levels are adjusted.
Headline sales of €2.4bn were up 2% excluding Russia, but down 2% on a direct year-on-year basis.
Volumes grew by 1% in the quarter, with growth resuming following four consecutive quarters of decline.
The Americas were down 7%, with the US down 11%.
Europe was down 6%, but excluding Russia was resilient, delivering 4% growth driven by Germany and eastern Europe.
Asia/rest of the world was up 8%, despite a 12% sales drop in China.
HelloFresh has delivered its highest-ever quarterly revenue in its first quarter of 2024 on strong demand for its ready-to-eat offering.
Sales were up 3.8% to €2.07bn in the quarter, with its RTE portfolio driving an additional €174m of sales to €496m.
However, its core meal kit product category delivered revenue decline to €1.56bn from €1.69bn in the period year.
Overall growth was a combination of a 2.6% decline in volumes and a 6.5% increase in average order value.
Margins also declined to 25.2% from 26.3%, primarily driven by temporarily higher RTE production costs during its rapid ramp-up phase.
The HelloFresh Group outlook for the fiscal year 2024 remains unchanged, with the company targeting 2% to 8% revenue growth in constant currency and €350m-€400m EBITDA.
Dominik Richter, co-founder and CEO of HelloFresh, said: “For the first quarter of 2024 we report our highest-ever revenue per quarter and a significant year-on-year growth in average order value. Our continued investments into the customer proposition for meal kits, such as introducing menu customisation options and product incentives, show promising results. This is evidenced by continuously improving customer lifetime values and very predictable order patterns of our customer base.
“After tripling our meal kit revenues from 2019 to 2022, we saw a temporary slowdown more recently, however our strategic goal to diversify revenues is paying off nicely. Our ready-to-eat product category is scaling at high rates and our brand Factor is one of the fastest-growing consumer brands in North America, more than offsetting the decline in meal kit revenues. RTE revenues now account for a quarter of total group revenues and we expect this share to grow further in the future.
“As part of this strategy we have announced launches in additional European markets recently, adding to the success we saw with prior launches in the US, Australia and Canada.”
On the markets this morning, the FTSE 100 is setting new records, up 0.4% to 8,075.3pts.
Early risers include Unilever, up 4.1% to 4,022p, Britvic, up 0.5% to 864p and CCEP, up 0.3% to €65.40.
Fallers include WH Smith, down 9.5% to 1,138p, Bakkavor, down 5.7% to 116p and Greggs, down 3.5% to 2,682p.
Yesterday in the City
The FTSE 100’s five-day run of gains to hit record highs came to an end yesterday, as the index moderately dipped by 0.1% to close at 8,040.3pts.
PZ Cussons was up 6.8% to 101p after it announced its intention to sell its St Tropez brands.
Other risers included Reckitt Benckiser, up 2.9% to 4,374p, Bakkavor, up 2.9% to 123p, Kerry Group, up 2.5% to €82.10, Naked Wines, up 1.9% to 54.5p and Just Eat Takeaway.com, up 1.5% to 1,216p.
Fallers include Ocado, down 3.5% to 364.6p, McBride, down 2.2% to 109.5p, Marks & Spencer, down 1.9% to 257.8p, Tate & Lyle, down 1.9% to 633p and WH Smith, down 1.7% to 1,258p
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