- Group winning more customers
- Grocery strength offsets Argos
- No change to full-year guidance
Hot on heels of rival Tesco (TSCO), second-placed UK supermarket group Sainsburys (SBRY) posted an upbeat third-quarter trading statement saying it had had ‘the biggest-ever Christmas’.
Inevitably, just as Tesco shares were sold off yesterday, Sainsburys shares were also down on the day losing 5p or 2% to 258p.
GAINING MARKET SHARE
For the 16 weeks to 4 January, Sainsburys recorded a 2.8% increase in like-for-like sales which was behind Tesco’s 3.1% increase but still represents a seventh consecutive quarter of better volume growth than the market and means the firm took market share for the fifth year running.
Over the final six weeks of the period, which included Christmas and New Year, the group reported 3.8% growth in grocery sales along with a 3.4% increase in general merchandise and clothing, and even Argos reported a slight increase in sales.
Chief executive Simon Roberts was in upbeat mood: ‘We have won grocery market share for the fifth consecutive Christmas, with more customers choosing Sainsbury's for their big shop. Driven by our leading combination of quality, value and service, we have achieved seven consecutive quarters of volume performance ahead of the market and further accelerated our two-year volume growth.’
Over half of big Christmas baskets included a Taste the Difference product, helping premium sales rise 16%, slightly ahead of Tesco’s Finest, with more than 200 bottles of fizz sold every minute in the days leading up to Christmas.
Roberts also celebrated record numbers of customers returning to its Nectar card, which drove switching gains from competitors especially in big baskets.
In a similar vein to Tesco, however, Sainsburys left its full-year operating profit guidance unchanged at £1.01 billion to £1.06 billion, representing growth of around 7%, although it did nudge up its forecast for Financial Services earnings.
EXPERT VIEWS
Jefferies analyst Frederick Wild said Sainsbury’s update showed a ‘familiar pattern of strong grocery performance offset by weaker-than-expected Argos’.
Wild added: ‘Despite this mixed delivery, we expect no change to consensus forecasts against a market likely positioned negatively into the print, with a calendar 2025 free cash flow yield of 9.8% representing a substantial discount to the wider European grocery space trading on sub-9%.’
Shore Capital’s head of research Clive Black pointed to the tough year-ago comparisons in grocery and the fact Argos ‘held its own in a disciplined manner’, implying it didn’t resort to price-cutting to lift sales.
‘Asset-backed, cash generative, and gaining share in grocery and clothing, we see Sainsbury equity on a FY25 price-to-earnings ratio of 11.8x and offering a dividend yield of 5.2% paid from free cash as looking particularly attractive,’ add Black.
