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Sainsbury’s boosts profits as Argos deal pays off

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Sainsbury’s has posted a 20.3% rise in underlying profit before tax to £302 million in the first half of its financial year.

Like-for-like sales (excluding fuel) rose by 0.6%.Underlying group sales (including new outlets- mainly Argos) rose by 3.5%.

Sales in convenience stores rose by 4.3% and online grocery sales rose 6.9%. Supermarket sales fell 0.5%.

£160 million of synergies from the Argos integration have now been realised, nine months ahead of schedule.

Shares rose 2% in early morning trading.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown: “Argos is proving to be an ace up the sleeve for Sainsbury’s in a tough retail environment. The World Cup and barbecue weather over the summer provided a welcome shot in the arm for the supermarket, though without this seasonal stimulus, sales growth from existing outlets wouldn’t look great.

“Grocery growth came from online orders and convenience stores, reflecting new shopping trends, which were probably exacerbated during the World Cup by football fans popping to their local shops for bangers and beers. Sales from the bigger supermarkets, by contrast, actually fell by 0.5%.

“However Sainsbury’s is using excess supermarket space to its advantage by installing Argos outlets in its stores. That’s feeding through to the bottom line, with £160 million of synergies from the purchase of Home Retail Group achieved nine months early. It’s also a pretty canny move when you consider that many consumers will like the idea of combining their Christmas grocery shop with picking up some gifts from Argos at the same time.”




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