Sainsbury’s sees food sales rise, but Argos drags first-half performance
Sainsbury’s, the UK’s second largest supermarket chain, reported a 5% increase in food sales in the first half of the year, reflecting growth in market share and growing demand for its flagship range, Taste the Difference.
This growth has placed Sainsbury’s in the leading position in the British grocery market, with a market share of 15.2%, just behind Tesco.
Chief executive Simon Roberts pointed out that the purchase of solid food is due to changing consumer habits, with more customers choosing to eat at home and treat themselves well. “We’re making the biggest market share gains in the industry, with continued strong value growth,” said Roberts, noting that consumers are spending more on premium products as food costs rise.
The company is focused on food, investing in its Aldi price match program, launching 600 new products in its convenience stores, and driving loyalty with Nectar prices. Roberts estimated that 25% of Sainsbury’s weekly shoppers are new customers, showing that these programs are paying off.
Despite the strong performance, the team faced headwinds from its struggling Argos division. Argos sales fell by 5% in the six months to September 14, with unfavorable summer weather, shoppers being wary of big-ticket purchases, and internet traffic challenges impacting its sales. Sainsbury’s responded with promotional and discount activity, helping to improve Argos’ performance in the latter part of the half-year period.
Total retail sales, excluding fuel, rose to £16.3 billion, up 3.1% from £15.8 billion last year. Core pre-tax profit grew by 4.7% to £356 million, while statutory pre-tax profit, excluding discontinued operations, fell by 52% to £131 million due to planned investment of £27 million across the business .
To address changing demand, Sainsbury’s has also invested in AI and automation with Blue Yonder, a platform that predicts each store’s product needs, helping to reduce food waste and ensure better stock availability.
Roberts urged the government to pay attention to the concerns of British farmers, who may face challenges due to the recent changes to the inheritance tax on agricultural goods. He called for cooperation to maintain a productive food system, ensuring the resilience of British farmers in a changing environment.
Looking ahead to the festive season, Sainsbury’s is optimistic, with early sales of its Christmas range and strong food orders setting a positive tone. The company generates an operating profit of between £1.01 billion and £1.06 billion for the full year, expecting growth of 5-10%.
Clive Black, analyst at Shore Capital, praised Sainsbury’s progress, saying, “Sainsbury’s has significantly improved its core value proposition, and that is starting to show in customer satisfaction.”
Shares in Sainsbury’s closed up 4.1% at 256¾p, as weaker revenues at Argos weighed on the company’s first-quarter performance. Despite the early challenges, Sainsbury’s expects a strong performance from Argos in the second half, driven by holiday shopping and Black Friday promotions.
