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Sales and profits have surged at Sainsbury’s as the country continues to battle the coronavirus pandemic.
The group upgraded its full-year profits forecast thanks to stronger-than-expected sales, particularly at Argos. Sainsbury’s said pre-tax profits would be 5% higher than last year.
Sainsbury’s also announced it would close a further 420 Argos stores over the next three years as it continues to integrate the retailer into its supermarkets. It said 3,500 roles would be affected by the proposed restructuring.
Total retail sales at the group climbed 7.1%, excluding fuel, in the six months to 21 September, with like-for-like growth of 6.9% and grocery sales up 8.2%.
Digital sales at the group soared 117% to £5.8bn to make up almost 40% of total revenues, with online grocery sales jumping 102%.
Argos also reported strong numbers, with general merchandise sales up 7.4% in the period. However, GM sales in Sainsbury’s own supermarkets fell 8.2% in the half and clothing sales were also down 18.3%.
Overall statutory group sales actually fell 1.1% to £14.9bn compared to a year ago as fuel revenues plummeted 45% in the half.
Underlying pre-tax profits surged 27% to £301m, but after £290m of extra costs related to Covid-19 - which were mostly offset by business rates relief of £230m - and £438m of one-off costs related to Argos store closures and other changes, Sainsbury’s reported a pre-tax loss for the period of £137m.
After holding off from deciding on paying a dividend earlier in the year, the supermarket announced a special dividend payment of 7.3p a share along with an interim divident of 3.2p.
CEO Simon Roberts, who took the helm from Mike Coupe earlier this year, said: “Covid-19 has accelerated a number of shifts in our industry. Investments over recent years in digital and technology have laid the foundations for us to flex and adapt quickly as customers needed to shop differently. Around 19 per cent of our sales were digital this time last year and nearly 40 per cent of our sales are digital today.
“While we are working hard to help feed the nation through the pandemic, we have also spent time thinking about how we deliver for our customers and our shareholders over the longer term.”
He also announced a strategy update for the group, which put food “back at the heart of Sainsbury’s”.
The business plans to lower food prices, triple new product launches, profitably grow online groceries to meet continuing demand and increase the rate of new convenience store openings over the next three years.
Sainsbury’s will also close all its meat, fish and deli counters based on “reduced customer demand” in an effort to make stores simpler to run and to reduce food waste.
The opening of Argos stores and collection points within Sainsbury’s store will accelerate over the next three-and-a-half years, with about 420 standalone Argos stores earmarked to close. The move could see up to 3,500 staff leave the business as a result.
The group plans to open 150 more Argos stores within its supermarkets, as well as adding between 150 and 200 collection points in stores.
Sainsbury’s revealed it was to make a second ‘thank-you’ payment of an additional 10% to all its frontline staff for all of the November lockdown.
CEO Simon Roberts also informed the board that he would waive any bonus due this financial year.
“As we go into lockdown in England for the second time this year and restrictions are in place across the UK, we know our customers and colleagues are feeling anxious and we will do all we can to support them,” he said.
”Our colleagues have done an exceptional job going above and beyond for our customers every day which is why we are giving our frontline colleagues a second 10 per cent thank you payment.
”Above all else today, I want to express my heartfelt thanks to every one of my colleagues in our stores, in our depots, and across our store support centres for all your hard work and for your outstanding team effort. We also want to support our communities and those in need and are creating a £5 million community fund for local charities and good causes, in addition to the £7 million we donated to Fareshare and Comic Relief earlier this year. We want to do our bit to ensure that no one goes hungry at Christmas and to support those most in need.
“While we are working hard to help feed the nation through the pandemic, we have also spent time thinking about how we deliver for our customers and our shareholders over the longer term.”
He added: ”We will put food back at the heart of Sainsbury’s. We are already working to make this happen - we have lowered prices on over 1,500 every day grocery products over the past few months and we will do more of this, focusing on the staple products that our customers buy every day.
”We know that customers are feeling the pinch and we want them to feel confident they will get always get great value, quality and service from Sainsbury’s. We will focus on accelerating product innovation and will bring new and exclusive products to our customers much more often. To support our ambition in food, we are accelerating our ambition to structurally reduce our cost base right across the business so we can invest faster back into our core food offer.”
Despite the strong performanced, shares in the supermarket opened 3.3% down at 202p.
Morning update
Sales and profits fell at Tate & Lyle as the drop in demand for out-of-home consumption during the coronavirus pandemic disrupted the ingredients group.
Revenues slipped 4% to £1.4bn in the six months to 30 September, with pre-tax profits down 4% to £157m.
Despite the surge in sales for fmcg brands and supermarkets across the world as shoppers buy more food and drink to consume at home, many of the groups Tate & Lyle supply with ingredients have been hit hard by the fall in on-the-go snacking and drinking. Soft drinks suppliers, which use a range of sweeteners made by Tate, had a particularly difficult second quarter as bars, pubs, restaurants, cafes and hotels all closed during lockdowns across the world.
However, Tate was bullish about its “strong” operational performance and cost discipline in the half.
CEO Nick Hampton said the first half of the year demonstrated “the strength, resilience and agility” of the business.
“This performance reflects the outstanding commitment of our people who have kept our operations running and our customers served through the pandemic. Our purpose of ’Improving Lives for Generations’ remains at the heart of our response to Covid-19, inspiring our people to look after their colleagues, families and local communities. I am very proud of, and humbled by, their resilience in the face of so many challenges.
”Both business divisions performed well supported by excellent operational performance and rigorous cost discipline. Primary Products delivered steady earnings despite a significant reduction in out-of-home consumption in North America. Food & Beverage Solutions delivered revenue and profit growth as our technical capabilities in sweetening, texture and fibre fortification supported customer demand for products that are lower in sugar, calories and fat, and with added fibre.”
However, he warned that “considerable uncertainty remains” while out-of-home consumption remains below pre-pandemic levels.
As a result, the group was not able to guide on full-year figures.
Tate shares have jumped 5.4% to 668.8p so far this morning.
A surge in demand from supermarkets was not enough to stop revenues and profits declining at logistics group Wincanton.
Sales fell 2.9% to £578.7m in the six months to 30 September as the coronavirus pandemic disrupted business, particularly earlier in the year during the first national lockdown.
Underlying EBITDA at the group decreased 15.1% to £43.2m as a result and pre-tax profits were down 33% to £19.1m.
However, the declines were partially offset by 16% growth recorded in the digital and ecommerce sector as a result of increased demand from retailers.
Wincanton works with the likes of Waitrose, Morrisons and Asda, as well as Wickes, The White Company and Screwfix.
CEO James Wroath said: “Wincanton has demonstrated agility, innovation and commitment to meet the critical supply chain needs of customers and consumers throughout the country.
”I am proud of how our team has responded to the challenge that Covid-19 has brought to our markets. The current environment strengthens our conviction that we are following the right strategy. The steps we have taken to refocus the group on growth markets, including disposing of our Pullman fleet services and our containers business, will underpin our ongoing performance.
“I am greatly encouraged by the new contracts we have secured so far this year to become a key partner for some of Britain’s biggest brands and public bodies, and we continue to see a healthy pipeline of new opportunities coming to market. Performance has been resilient in the first half, we expect the good momentum with which we end the period to continue and consequently expect results for current year to be materially ahead of market expectations.”
Shares in the group fell 2.2% to 223.1p this morning.
Investors continued to be bullish this morning despite the ongoing uncertainty in the US Presidential election, with the FTSE 100 opening 0.4% higher to 5,903.15pts after a strong showing on Wall Street yesterday.
Investors continued to be bullish this morning despite the ongoing uncertainty in the US Presidential election, with the FTSE 100 opening 0.4% higher to 5,903.15pts after a strong showing on Wall Street yesterday.
Primark owner Associated British Foods opened down 1.6% to 1,680.5p, M&S is down 0.9% to 95.6p, British American Tobacco is trading down 0.9% to 2,554.5p and Imperial Brands is down 0.8% to 1,261p.
Early food and drink risers include B&M European Value Retail, up 1% to 515.6p, C&C Group, up 1.1% to 154.2p, and Cranswick, up 1.6% to 3,503.3p.
Yesterday in the City
The FTSE 100 ended the day 1.7% up to 5,883.3pts as global markets shrugged off the uncertainty of the results of the US presidential election by closing up.
Marks & Spencer rose 4.9% to 96.5p despite posting its first half results showing its first loss in its near-100 year history as a listed group. M&S’ online partner Ocado was up 5.4% to 2,561p.
Premier Foods jumped 5.4% to 103.6p on news it could be set to sell its 49% in Hovis to private equity player Endless.
On a strong day for many consumer stocks, other risers included C&C Group, up 5.2% to 152.6p, Just Eat Takeaway.com, up 4.3% to 9,006p, Coca-Cola HBC, up 3.8% to 1,837p, Cranswick, up 3.6% to 3,448p, Diageo, up 3.6% to 2,649p, Kerry Group, up 3.5% to €108.20, British American Tobacco, up 3.5% to 2,576.5p, DS Smith, up 3.2% to 298.8p, Tate & Lyle, up 3.2% to 633p, and AG Barr, up 2.9% to 474.5p.
The day’s fallers included Hotel Chocolat, down 5.3% to 310p, Domino’s Pizza Group, down 2.6% to 326p, Coca-Cola European Partners, down 2.6% to €30.45, McColl’s Retail Group, down 1.4% to 20.8p and Associated British Foods, down 1.2% to 1,707p.
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