A very merry Christmas: Sainsbury’s upgrades full year profits to £720m thanks to retail boom
Sainsbury’s has reported a very merry Christmas this morning, upgrading its pre-tax profits for the full year to £720m.
In its third quarter trading update, the supermarket giant attributed its bold investments in value, new products and service to driving volume share gains, growing ahead of the market through the third quarter and over the key festive period.
Online sales were nearly double the level of two years ago, and Argos, which was acquired by Sainsbury’s in 2016, continued to benefit from stronger margins supported by operating cost reductions.
It launched over 600 new products in the third quarter, of which 300 were new Christmas products, as part of its plan to triple levels of product innovation.
New Taste the Difference products in party food, desserts, wines and spirits were particularly popular and there were record sales of champagne and sparkling wines.
Taste the Difference was its fastest growing product tier with sales up 13 per cent over two years in the key Christmas weeks.
New products were supported by a record recruitment drive this Christmas, investing to employ 22,000 temporary employees.
Although general merchandise and clothing sales were down year on year after a strong performance last year, clothing profits were in line with expectations, reflecting stronger gross margins and operating cost transformation
Full price clothing sales were up 38 per cent versus two years ago as it reduced markdowns and promotions.
Simon Roberts, chief executive of J Sainsbury, said he was “really pleased” with its Christmas service.
“The backdrop was challenging and our teams worked hard throughout the year to make sure we had all of the products everyone wanted. Our suppliers did a great job in challenging conditions throughout the quarter”, he said.
To reward staff, Sainsbury’s recently announced that it would be investing £100m to increase the base pay to £10 per hour from March.
Sainsbury’s now expects to report underlying profit before tax of at least £720m in the financial year to March 2022.
The overall outlook in the trading update said: “Our expectations for full year profits are ahead of previous guidance, with investment in the customer proposition and higher operating cost inflation offset by structural cost savings and stronger than expected grocery volumes, driven in part by increased in-home grocery consumption.”
Free cash flow remains strong and the supermarket expects to meet its net debt reduction target ahead of schedule.