Strong grocery volumes and the completed Argos sale pushed Sainsbury's to lift its profit outlook, but a frozen dividend left investors unmoved.
Sainsbury's (LSE: SBRY) has nudged up the bottom end of its full-year profit guidance after a robust first half in which grocery sales growth outpaced the wider market, even as the stock slipped 3% on the day of the announcement.
The supermarket group reported sales from continuing operations, excluding fuel, up 2.6% to £14.0bn in the 28 weeks to 12 September, with grocery sales rising 2.9% on the back of stronger volumes. Underlying operating profit from continuing operations climbed 3.6% to £525m, prompting the board to raise its full-year guidance range to between £1,025m and £1,065m.
The shares fell despite the improved outlook, a move likely linked to the decision to hold the interim dividend flat rather than grow it, which may have disappointed income-focused investors even as the underlying trading narrative strengthened.
Sainsbury's pointed to its price-matching strategy against Aldi and the Nectar loyalty scheme as key drivers of market share gains, with online grocery sales up 9% over the period. A statutory loss of £164m was recorded, but the company said this was entirely attributable to costs linked to the disposal of Argos rather than any weakness in its core food business.
Attention now turns to the completion of the Argos sale to Swift Partners, expected by February, which chief executive Simon Roberts has framed as central to building a simpler, food-focused Sainsbury's. The group is also continuing its £300m share buyback programme, underlining confidence in cash generation even as it resists increasing shareholder distributions via the dividend for now.
This report is based on J Sainsbury plc's announcement and coverage by UK Investor Magazine. Company announcements can be tracked via London Stock Exchange RNS and Investegate, and the full markets calendar is worth watching for the next update.
This article is for general information only and does not constitute investment advice or a recommendation to buy or sell any security. Photo: Franki Chamaki on Unsplash.