Stellar Christmas Sale Prompts Britain’s Sainsbury’s To Raise Profit Outlook

With people in the United Kingdom being forced to celebrate at home during the festive season because of the restrictions imposed to prevent the spread of the second wave of the Covid-19, the British supermarket group Sainsbury’s beat its own expectations for trading, prompting the company to raise its profit outlook.

In the company’s fiscal third quarter, there was a 8.6 per cent growth in like-for-like sales, excluding fuel, over the 15 weeks to January 2, Sainsbury’s, the second largest grocer of Britain after Tesco, said on Thursday.

The company said that there was much stronger demand and sale for food, general merchandise and clothing than the company had expected during the Christmas season as the country was engulfed in a second wave of national lockdown in November. Subsequently the restrictions were further increased throughout the United Kingdom. Along with these factors which forced people to stay back home, the company’s better than expected performance was also driven by its improved online operations.

Following the announcement of the expectation beating performance, the shares of the company rose by 3.7 per cent with a 10 per cent year-on-year gains.

Many customers were forced to change their Christmas plans at the last minute because of the restrictions which resulted in a different shopping behaviour of consumers.

“Given all of the challenges that everyone’s felt, customers wanted to treat themselves,” CEO Simon Roberts told reporters.

Roberts said that smaller turkeys and more lamb and beef than normal were sold by Sainsbury’s because of the restrictions induced smaller gatherings.

There was a 7.4 per cent growth in grocery sales and an 11 per cent increase in Sainsbury’s premium ‘Taste the Difference’ brand. There was also a 52 per cent growth in the sales of premium champagne. Growth in sale of general merchandise was 6 per cent while the company reported a 8.4 per cent rise in sales in the Argos division. In comparison, clothing sale rose by a modest 0.4 per cent.

There was an astounding 128 per cent jump in the sale of online grocery while there was 18 per cent spike in overall digital sales which accounted for about 44 per cent of total sales of the company.

For its 2020-21 year Sainsbury’s forecast underlying pretax profit of at least 330 million pounds after allowing for business rates relief of 410 million pounds ($557 million). This was higher than the company’s previkous forecast made last month of pretax profit of at least 270 million pounds. However this latest forecast was down from the 586 million in pretax profit that had been notched up by the company 2019-2020 because of the costs of the pandemic.

The absence rate of staff reached 8 per cent with the intensification of the spread of the coronavirus pandemic, Roberts said.

Restrictions imposed to prevent the spread of the pandemic mean many people are working from home and the hospitality sector is closed.

(Adapted from Reuters.com)

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