Sainsbury’s today announced it has joined the £1bn profits club but also warned over rising costs and price competition.
In a statement released on Thursday, Sainsbury’s said pre-tax profits rose 38.6% to £384m but underlying operating profit hit £1bn if one-off items, such as those related to the closure of cafes and hot food counters announced in January, were excluded.
Simon Roberts, the chief executive of Sainsbury’s, said: “Our belief in the strength of Sainsbury’s offer has driven our decision to make our largest investment in expanding our store space in over a decade as we open supermarkets in key new locations and extend food space within many of our existing stores.”
Russ Mould, AJ Bell’s retail expert, said: “When Asda fired the opening salvos in a UK supermarket price war in mid-March the markets immediately sat up and took notice and the latest updates from Tesco and now Sainsbury’s suggest this was the right call.
“Like Tesco, Sainsbury’s wants to equip itself to protect its competitive position, hence its guidance for flat profit in the coming year as it looks to offer customers value for money.
“The main winners in a price war would ultimately be shoppers, however, there were enough positive takeaways in the results to provide some cheer. The ‘food first’ strategy under Simon Roberts is clearly yielding real benefits with a healthy increase in the dividend providing shareholders with real sustenance.
“There is also a chance that Sainsbury’s and Tesco are being overly conservative and Asda’s big talk doesn’t translate into anything meaningful so there is scope for both to surprise on the upside.
“The main disappointment for Sainsbury’s continues to be Argos, with its laggard status raising questions about its long-term future as part of the group. If food really does come first then offloading Argos would allow it to focus and potentially invest more in its core proposition.”
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