Sainsbury's sales growth accelerates in second quarter

(Sharecast News) - UK supermarket chain Sainsbury's reported increasing momentum in its second quarter as it reiterated guidance for strong underlying profit growth this financial year, helped by improving grocery volumes and a stronger performance from Argos in the second half. The group reported total retail sales growth of 3.1% when excluding fuel for the 28 weeks to 14 September, with growth accelerating from 2.3% in the first quarter to 4.1% in the second.

Grocery sale growth picked up from 4.8% to 5.3% over the second quarter, with the company claiming to have seen the biggest market-share gains in the industry.

"Continued improvement in value perception is increasing our customer loyalty, with more main shop primary customers, and basket size growth significantly ahead of competitors," the company said.

General merchandise and clothing sales growth turned positive at 2.2% after dropping by 4.3% in the first quarter, helped by a strong performance from the Tu Clothing division, specifically from the womenswear line over the summer.

Argos, meanwhile, saw sales declines ease significantly, from -7.7% to just -1.4% in the second quarter, with the company pointing to continuing momentum in the second half.

Looking ahead, Sainsbury's said retail underlying operating profit should be between £1.01bn and £1.06bn for the full year ending March 2025, representing growth 5% to 10%.

However, within that forecast, it now expects the financial services division to deliver an underlying operating profit of £15m-25m, compared with earlier guidance of "between break even and £15m".

"Our grocery volume growth has delivered strong profit leverage at Sainsbury's, partially offset by a tough first quarter at Argos. Argos trading has improved through the second quarter and in more recent weeks, so we continue to expect to deliver strong retail underlying operating profit growth and free cash flow generation for the full year," said chief executive Simon Roberts.