Sainsbury's reveals expectation-beating profits
Shoppers continued to pile through the check-outs at Sainsbury's in the six months to October, leading the supermarket giant to reveal expectation-beating profits for the period.
The UK's third largest grocer notched up a 3.7% jump in total sales to £11.15 billion, helping pre-tax profit climb 32.6% to £342 million.
However, despite its success, Sainsbury's reiterated warnings that lower food inflation was already slowing sales growth and it expected a more muted second-half showing.
In the 28 weeks to 3 October, sales on a like-for-like basis (excluding fuel and new store openings) rose by 5.7%. Despite the economic gloom hanging over the UK, it was Sainsbury's fifth successive year of like-for-like sales growth.
However, total sales were pegged back by lower petrol prices, which retreated following the slump in oil prices from last year's all-time high of $147 a barrel.
Sainsbury's said it saw a "strong" performance from its non-food lines, with this area of the business growing around 2.5 times the rate of food - adding that weekly transactions were up 800,000 year-on-year to over 18.5 million.
However, chief executive Justin King warns that the good times will come to an end in the second half of the current financial year.
"As we enter the second half, we expect the economic environment to remain challenging and market growth to slow due to reduced food price inflation," he said. "We remain confident that our universal customer appeal means we are well positioned to perform in this environment."
The latest TNS Worldpanel figures showed that Sainsbury's is growing at a faster rate than rival Tesco, at 5.6% over the 12-week period. However, Tesco is up over a four-week period, increasing its share of the grocery market for the first time in nearly two years after doubling the points accrued to its Clubcard loyalty scheme.
In its statement, Sainsbury's also confirmed that around 20,000 temporary staff would be employed to cope with the heightened customer volume around Christmas.
Chairman David Tyler had some more upbeat words for investors, as he revealed the group's interim dividend payment.
"We have delivered a strong performance during the first half of the year. Sainsbury's is responding well to the current economic environment and it has significant opportunity for continued long-term growth. Our interim dividend is 4p per share in line with our policy to pay this at 30% of the previous full year dividend."
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.