Join our community of smart investors

Sainsbury dons glad rags

RESULTS: Non-food sales drive a 9 per cent rise in underlying pre-tax profits at supermarket group
May 11, 2011

When Tesco's new chief executive Philip Clarke unveiled results of the supermarket giant last week, he bemoaned its weak non-food sales and said the group needed to up its game. Judging from Sainsbury's full-year results some of the problems may be due to the success of the UK's third largest player in expanding into the area. Sainsbury reported that non-food sales rose three times as fast as its food sales and it has plans to push further into this market segment.

IC TIP: Hold at 356p

The retailer has performed robustly in a difficult environment and managed to increase like-for-like sales excluding fuel by 2.3 per cent. It used cost savings to minimise the impact of inflation on customers, but was still about to use efficiency savings to boost underlying operating margins by 14 basis points to 3.5 per cent.

The overall result also benefited from Sainsbury's ongoing expansion. The group added 1.5m square foot of gross new floor space and has exceeded its two year target of 15 per cent growth. The property portfolio has also been revalued and is now believed to be worth £10.5bn, up £700m.

Strip out property gains, and underlying pre-tax profits rose 9 per cent to £665m while EPS was up 11 per cent to 26.5p. Subject to revision, Seymour Pierce expect current year pre-tax profits of £734m and EPS of 29p.

SAINSBURY (SBRY)
ORD PRICE:356pMARKET VALUE:£6.7bn
TOUCH:355-356p12-MONTH HIGH:397pLOW: 312p
DIVIDEND YIELD:4.2%PE RATIO:10
NET ASSET VALUE:290pNET DEBT:33%

Year to 19 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200717.247719.29.8
200817.847919.112.0
200918.946616.613.2
201020.073332.114.2
201121.182734.415.1
% change+6+13+7+6

Ex-div:18 May

Payment:15 Jul

.

More analysis of company results