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Reuters
Published
Nov 10, 2010
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Sainsbury says growth plans to offset tough market

By
Reuters
Published
Nov 10, 2010

LONDON, Nov 10 (Reuters) - British grocer J Sainsbury Plc (SBRY.L) said new stores and its expansion into non-food ranges, convenience shopping and online would help it to cope with a tough economic outlook as it met first-half profit forecasts.

Sainsbury

Britain's third-biggest supermarket group by market share behind Tesco Plc (TSCO.L) and Wal-Mart's (WMT.N) Asda joined the chorus of retailers warning that government steps to reduce its debts, including higher taxes and public spending cuts, would make life harder for shoppers in the months ahead.

"As we enter the second half, we expect the economic environment to remain challenging," Chief Executive Justin King said on Wednesday.

But King added: "We remain confident that our universal customer appeal, combined with our strong space growth momentum, means we are in a good position to perform well in this environment."

Sainsbury, which runs 537 supermarkets and 335 convenience stores, said profit before tax and one-off items rose 8 percent to 332 million pounds ($536 million) in the 28 weeks ended Oct. 2, compared with an average forecast of 334 million in a Reuters poll of 12 analysts.

Sales climbed 7 percent to 11.94 billion pounds and the group said it would raise its interim dividend 7.5 percent to 4.3 pence a share.

Sainsbury is outperforming a sluggish grocery market, helped by its strength in the more affluent south of Britain, a focus on affordable luxury foods and its growth plans.

The group said non-food ranges such as clothing and homewares grew at three times the rate of food in the first half, while online grocery sales were up over 25 percent and convenience store sales surpassed 1 billion pounds.

Some analysts have questioned, however, whether the improvement in sales is translating into better profitability.

Sainsbury's underlying operating margin rose 8 basis points to 3.36 percent, close to an average forecast of 3.4 percent.

Sainsbury shares have outperformed the STOXX Europe 600 retail index .SXRP by 11 percent this year. They closed at 377.2 pence on Tuesday, valuing the company at 7.1 billion pounds.

(Editing by David Holmes) ($1=.6189 Pound)

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