Sainsbury’s profits solid as it plans modest convenience store expansion this year

The supermarket’s grocery sales grew by 0.8% in the 28 weeks to 18 September compared with the same period last year and 9.1% up from two years ago.

General merchandise sales were down 5.8% on last year but up 1.1% against 2019/20.

Statutory profit before tax was a highlight, jumping to £541m from a first half loss of £137m last year, a change the supermarket attributed to “significantly lower restructuring and impairment costs versus H1 20/21 and £181m of exceptional income from settling legal disputes”.

Sainsbury’s convenience business grew 4.9% from the same period last year although it noted that sales remain below pre-pandemic levels.

It plans to open “around 25” convenience stores this year.

The latest figures cover the period in which Sainsbury’s decided to shut down its wholesale operation, which stopped in their tracks Simply Fresh’s plans to roll out its supply agreement with the supermarket.

In the wake of the latest figures, several analysts highlighted the possibility that Sainsbury’s could be a takeover target in the near future.

Nick Everitt, director of advisory at Edge by Ascential, said: “We could soon see Amazon make a bid for an existing brick-and-mortar supermarket chain and Sainsbury’s could be a target for acquisition.

“Sainsbury’s established foothold and expertise in the grocery sector, together with Amazon’s ambition and prowess in digital transformation, means this pairing could be a force to be reckoned with.”

Freetrade’s analyst Dan Lane said that “all eyes are on Czech tycoon Daniel Kretinsky” as another possible bidder for the UK supermarket chain.

Sainsbury’s commitment to combating climate change was also noted by observers.

Chris Daly, chief executive of the Chartered Institute of Marketing, said: “The supermarket giant’s public advocacy and support of global efforts to combat climate change has been well received, especially in the build up to COP26.

“It has pledged to become net zero in its own operations by 2035, five years earlier than its original ambition.

“This positive commitment aligns with the UN’s goal to limit global warming to 1.5 degrees.

“The retailer has launched ‘Sainsbury’s Global Farm’ – an online resource that connects customers with different suppliers around the world – to showcase the good work its food producers are already doing to tackle climate change.”

But Daly added that Sainsbury’s had to be careful to avoid accusations of ‘corporate granstanding’ and being inauthentic, because surveys suggest that 63% of consumers suspect brands only get involved with sustainability for commercial reasons, as opposed to ethical ones.