Sainsbury’s profits fall - but edible flowers hit the shelves
Sainsbury’s has announced a 9% fall in underlying profit before tax in the first half of this financial year, to £251 million.
However, thanks to the additional shares placed in the market to fund the Home Retail Group acquisition last year, this translates into a 22% fall in underlying earnings per share, from 11.2p per share to 8.7p per share.
Like-for-like sales, including Argos but excluding fuel, grew by 1.6% in the half. However the second quarter was significantly weaker than the first, registering just 0.6% sales growth, compared with 2.3% in Q1.
This was driven by sales falling backwards in the general merchandise division, which fell by 0.1% across the half, and by 1.6% in the second quarter.
Sainsbury’s has trimmed the interim dividend to 3.1p per share, and confirmed it expects to deliver full year underlying pre-tax profits in line with market expectations of £572 million.
Shares fell 3% in early morning trading.
Laith Khalaf, Senior Analyst, Hargreaves Lansdown:
‘A slow summer has dragged down profits at Sainsbury’s, which is battling industry-wide headwinds in the retail sector. Consumer spending is under pressure from higher inflation, while it’s costing supermarkets more to fill their shelves with stock.
The good news is Sainsbury’s tells us it was the first supermarket in the UK to stock edible flowers. Presumably this means that ordinary shoppers will now queue up cheek by jowl with Michelin star chefs, and well-heeled squirrels and rabbits at the checkouts. Hopefully this move won’t lead to any confusion for rushed, last-minute shoppers next Mother’s Day.
The integration of Argos is progressing ahead of schedule, and this is a key plank in Sainsbury’s success moving forwards. The supermarkets are going through a period of reinvention as they try to adapt to changing shopping habits. Tesco is looking to buy Booker group, Morrison’s has partnered up with McColl’s and Amazon, and Sainsbury’s big chess move was the purchase of Home Retail Group last year.
The forthcoming festive period will be a key test of whether the combination of Sainsbury’s and Argos is greater than the sum of its parts, as the convenience of visiting one location to pick up both Christmas gifts and groceries should be a tempting one for shoppers.’