Sainsbury's keeps guidance despite LFL sales slowdown in Q1

(Sharecast News) - Sainsbury's has reiterated its profit guidance for the full year after a "market-beating" grocery performance in its first quarter, despite like-for-like sales growth slowing dramatically on the back of declines in general merchandise sales and at its Argos division. Total retail sales excluding fuel increased by 2.6% year-on-year in the 16 weeks to 22 June, with like-for-like sales rising by 2.7%. That's down from the 4.8% LFL growth seen in the fourth quarter of the previous financial year and 7.4% growth in the third.

Nevertheless, the company said it achieved the biggest market-share gains of any grocer during the period, with consistent net switching gains by customers, according to Kantar Worldpanel data.

Grocery sales increased by a "market-beating" 4.8% during the quarter, with Sainsbury's hailing increases in basket sizes and competitive pricing driving volume growth.

However, general merchandise and clothing sales dropped by 4.3% on last year - a slight improvement from the 5.5% decline in the fourth quarter - as better clothing sales momentum was offset by weaker seasonal general merchandise sales.

At its Argos division, sales excluding the recently closed Republic of Ireland business were down 6.2% which it said reflected a particularly strong comparative period with significantly lower seasonal sales and weaker demand for consumer electronics.

"We are pleased with our market-beating grocery performance and the early progress we're making against our Next Level Sainsbury's plan. We've been winning from competitors every month for 15 months, as more and more people are choosing Sainsbury's for their big weekly shop," said chief executive Simon Roberts.

Sainsbury's continues to expect retail underlying operating profit to grow by 5-10% to £1.01-1.06bn for the year ending 2 March 2025, and retail free cash flow of "at least" £500m, down from £639m previously.