Relative to the stagnant trading backdrop for the food retailers, Sainsbury's (SBRY) half year to the end of September gave cause for celebration. Although, given that like-for-likes were up just 1.7 per cent compared with a 5.1 per cent rise in the same six months last year, it’s a case of popping the cork on a bottle of 'Taste the Differenc'e cava rather than the really good stuff. Overall sales rose 4 per cent to £13.4bn, underlying EPS was up 9.4 per cent at 15.2p and the dividend got a 6.7 per cent boost to 4.8p.
Perhaps the most impressive aspect of Sainsbury's first-half outperformance is that it was achieved without the group being dragged deeply into the developing industry price war. Recent news that weak sales has prompted Morrison to try and win customers back with a 10-per-cent-off discount card sent shudders though the City over the prospect of Christmas carnage. For now, promotions such as Brand Match seem to be working for Sainsbury and reinforcing shoppers’ perception that the supermarket can help them 'Live Well For Less' - to borrow the company's own marketing slogan.
Sainsbury’s first-half success has been built on exploiting a number of key industry trends. The group has deftly played a switch by cash-strapped shoppers to own-label products and non-food sales have also produced strong growth thanks to the group's focus on high street fashions and popular cultural trends, such as home baking. There was 20 per cent sales growth from both the group’s online business and its smaller convenience-style stores, which have been opening at a rate of two a week. Meanwhile £60m of cost reductions also helped boost profits.
Sainsbury’s success in attracting shoppers despite steering clear of really aggressive promotional activity, helped nudge up its market share from 16.6 per cent to 16.7 per cent according to data from Kantar. Broker Seymour Pierce forecasts full-year pre-tax profits of £748m and EPS of 28.6p rising to £797m and 30.4p in 2014.
