Sainsbury’s hails hike in underlying profits as sales rise

● Annual financial results are released to coincide with details of proposed merger

Sainsbury’s yesterday reported a return to underlying profit growth and a modest rise in like-for-like sales as it unveiled details of its agreed merger with Walmart-owned Asda.

The UK’S second biggest supermarket chain, which saw its shares surge following confirmation of the proposed £12 billion tie-up, pointed to a “good” food performance with transactions growing ahead of the market and an “improving margin trend”.

General merchandise and clothing, including sales from the Argos catalogue business acquired in 2016, continue to “outperform a challenging market”, the group added.

Unaudited results for the 52 weeks to 10 March revealed an underlying profit before tax of £589 million, up 1.4 per cent from the £581m posted a year earlier. There was a second-half profit increase of 11 per cent.

Group sales, including VAT, rose 9 per cent to just over £31.7 billion, with like-for-like sales, which strip out store openings and additional selling space, nudging up 1.3 per cent.

The board is proposing a final dividend of 7.1p per share, up from 6.6p last year, making a full-year payout of 10.2p – in line with 2016-17.

The group delivered £185m in cost savings during the year, driven by synergies linked to its integration of Argos. On a statutory reporting basis, fullyear pre-tax profits fell 19 per cent to £409m.

Sainsbury’s Bank profits grew to £69m, but are expected to fall back to about £30m next year.

Group chief executive Mike Coupe said: “We have accelerated the rate of change and innovation across the group and more customers are choosing to shop with us than ever before as a result.

“I am pleased to announce an increase in underlying profits before tax to £589m, driven by delivery of Argos synergies, efficiency savings across the group and improving food margin trends.

“We are focused on making Sainsbury’s a destination of choice. We are clearly differentiated by the quality of our food and we have recently invested a further £150m to lower prices.

“General merchandise and clothing are both performing ahead of the market and, in response to great customer feedback and financial returns, we are opening Argos stores in our supermarkets faster than we originally planned.”

He added: “Sainsbury’s Bank profits grew as we fully consolidated Argos Financial Services during the year. Looking to the year ahead, we expect lending margins to remain under pressure in a competitive market.”

In the financial year to December 2017, Asda saw a 2.6 per cent in sales to around £22.2bn and a return to positive comparable sales for the full year. However, investment in prices dragged down operating profit to £720m from £845m.

If the merger goes ahead, the unified group would have a network of 2,800 Sainsbury’s, Asda and Argos stores.