Sainsbury's sticks with volume over margins, no Home Retail detail yet

As far as we're concerned, the main disappointment was the lack of further detail relating to the group's recent acquisition of what remains of Argos-owner Home Retail (HOME). The latter once owned DIY chain Homebase as well, but sold it to Australian buyer Wesfarmers earlier in the year. What remains clear is Sainsbury's determination to build a "multi-product, multichannel" shopping experience for its customers, and the warehouse network behind the Argos brand was seen as a big draw. More detail is expected with the deal's completion in the third quarter of the calendar year.

So far Sainsbury's has incurred around £15m in fees associated with the deal, which contributed to exceptional costs totalling £90m. That's a considerable improvement on last year, when one-off expenses reached £713m, as the grocer took impairments against unprofitable stores and sites that it had decided not to develop. In the reported period, the group clawed back £225m in cost savings, and remains on track to reach its target of £500m in recouped costs by the 2018 financial year.

As it stands, the future for Sainsbury's is a mix of challenges and opportunities. Simplifying and lowering prices has boosted volumes and transaction growth, although this had a deflationary effect on like-for-like sales, which dipped 0.9 per cent last year. However, the grocer did hold on to its market share of 16.5 per cent. Elsewhere, general merchandise sales improved by 3.5 per cent, clothing sales rose faster than the market at 8.5 per cent, and Sainsbury's Bank improved its underlying operating profit from £62m to £65m.

Due to lower than expected tax charges, Shore Capital nudged EPS forecasts for the 2017 financial year up to 22.8p from 21.5p, compared with 24.2p in FY2016.