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Sainsbury’s reported a rise in half-year profits as strong food sales offset weak trading at Argos.
Underlying profit at the UK’s second-largest supermarket chain rose 3.7 per cent to £503mn on retail sales of £16.3bn in the six months to mid-September. The grocer maintained its annual profit outlook of about £1bn, an increase of between 5 and 10 per cent year on year.
Sainsbury’s sales, excluding fuel, were up 4.6 per cent, with grocery sales growth of 5 per cent and a decline of 1.5 per cent in general merchandise and clothing, including a fall of 5 per cent at retailer Argos.
The supermarket said Argos had suffered from a slow start to the summer and lower demand for big-ticket items, as well as weaker online traffic.
Chief executive Simon Roberts said the “food business is going from strength to strength” and trading at Argos had improved in recent months compared with a “tough first quarter”. He noted that sales of the grocer’s premium Taste the Difference range were up 18 per cent in the second quarter, with those products now appearing in one in three baskets as customers dined in more at home.
The company, which controls 15.2 per cent of the UK food market and also owns the Tu clothing brand, has been converting more of its general merchandise space in shops to groceries to offer more choice to customers. Like larger chain Tesco, it has also been deploying Aldi price match and loyalty schemes to boost trade amid a fierce battle with rivals.
Second-quarter like-for-like sales, excluding fuel, rose 4.2 per cent, from 2.7 per cent in the first quarter, while like-for-like sales for the half-year increased 3.4 per cent.
Earlier this year it set out plans to cut a further £1bn in costs over the next three years and “right-size” the business.
Roberts said that as Sainsbury’s headed into the festive season, “there is real energy and excitement at Sainsbury’s and Argos and we’re expecting another strong performance”.
On Thursday, it slightly upgraded financial services profit from up to £15mn to between £15mn and £25mn.