Sainsbury’s sales up 8.5 per cent as grocer ‘feeds the nation’ during lockdown
Grocer Sainsbury’s today said that total first quarter sales increased by 8.5 per cent as the supermarket beat expectations despite the coronavirus pandemic.
It said that although it was forecasting a £500m profit hit due to the crisis, stronger grocery sales and business rates relief would offset the shortfall.
Shares in the grocer jumped initially before falling back to trade 0.4 per cent.
The figures
Grocery sales were the main driver of growth, increasing 10.5 per cent over the quarter as people flocked to the supermarkets during lockdown.
Sainsbury’s said that digital sales had more than doubled in the period, with more than 50 per cent of new online customers new to the shop altogether.
Data firm Kantar said digital sales now made up 15 per cent of the group’s total sales.
For online groceries, sales grew 87 per cent year on year, with orders increasing from 370,000 to 650,000 per week.
Subsidiary Argos also performed well despite having its 573 standalone stores closed for most of the quarter, with total sales up 10.7 per cent.
Clothing sales fell 26.7 per cent but Sainsbury’s said that there were encouraging signs that they were starting to pick up at the end of the quarter.
In terms of cash, the grocer said it had £335m in excess capital. Due to its strong liquidity the firm said it had repaid £500m borrowed under its revolving credit facility earlier this year.
Richard Hunter of Interactive Investor said the decision to pay back the £500m was a “show of confidence” from Sainsbury’s, which “should augur well for any decision Sainsbury makes on the resumption of the dividend later in the year”.
Why it’s interesting
Supermarkets have been among the few industries to do well out of the lockdown period, as people initially rushed to panic buy essential items.
According to Kantar, in the last four weeks grocery sales increased 18.9 per cent across the sector even with many of the lockdown restrictions lifted.
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Sainsbury’s said that the recent spell of good weather had been positive for sales, but warned that operating costs remained high because of precautions around customer safety and increased online operations.
The grocer said it was “cautious” about the rest of the year, adding that a further weakening of consumer spending was “likely”.
It “remains impossible to predict the full nature, extent and duration of the impact of COVID-19 on sales and costs”.
Ray Gaul, senior vice president for retail insights at Kantar, said: “While Sainsbury’s has taken on extraordinary additional costs to stay open during the pandemic, sales have grown at a record pace making it much easier to cover these costs and remain true to 2020/21’s financial objectives.
“Sainsburys is now a digital first business in a revamped league competition”.
John Moore, senior investment manager at Brewin Dolphin, said that the success of Argos during the pandemic would likely lead to a review of the subsidiary’s property estate.
“The ‘buy at Argos and collect at Sainsbury’s’ strategy worked well during lockdown and this is likely to accelerate a review of the Argos property estate in time, which may deliver some cost savings and efficiencies”, he said.
What Sainsbury’s said
Chief executive Simon Roberts said: “Our business has changed fundamentally from four months ago. We have more than doubled our weekly sales of online groceries in recent weeks and Argos sales were strong while operating as an online-only business for almost twelve
weeks.
“Warm weather boosted food sales and sales in seasonal categories in Argos, but sales of clothing and fuel and trading in city centre convenience stores were all significantly down year on year as a result of lockdown.
“We have worked really hard to listen and to respond to customers throughout the crisis. We have lowered prices on many key products as we continue to focus on lower regular prices.
“Our price position versus our competitors has improved in the quarter, Sainsbury’s key customer feedback scores are at record levels and we have gained market share”.
More to follow.