UK's Sainsbury's follows Tesco in lifting profit outlook (updated)

J Sainsbury

Today 07:26

First half profit up 3.6%
Q2 like-for-like sales, excluding fuel, up 1.2%
Raises lower end of full-year profit outlook
Expects market 'to remain very competitive'
Adds quote paragraph 9, shares 11
By James Davey
LONDON, Oct 22 (Reuters) - Sainsbury's, Britain's second-biggest supermarket group, followed industry leader Tesco in upgrading the lower end of its full-year profit outlook on Thursday after posting a 3.6% rise for its first half despite slower sales growth.
The first half results were published two weeks after media reports that Sainsbury's held merger talks with smaller rival Morrisons earlier this year but walked away.
Sainsbury's, which has a 15.2% share of Britain's grocery market, trailing only Tesco, said like-for-like sales, excluding fuel, rose 1.2% in its second quarter, below analysts' average forecast, having been up 2.3% in the previous quarter.
Grocery sales rose 2.2% in the second quarter but general merchandise and clothing sales fell 2.9%.
"Looking to the second half, we expect the market to remain very competitive and we will make deliberate, balanced choices to sustain the strength of our offer, investing in value, quality, availability and service," Sainsbury's said.

Sainsbury's was up against a strong comparative performance in the first half last year when like-for-like sales rose 4.5%, boosted by disruption at competitors Marks & Spencer MKS.L, the Co-op and Asda.
The conflict in the Middle East and its impact on energy and motor fuel prices also ate into discretionary household expenditure during the first half of this year.
In July, Sainsbury's agreed to sell its Argos general merchandise business to Swift Partners for at least £120 million.
For the six months to September 12 Sainsbury's posted continuing underlying operating profit of £525 million ($704 million) reflecting volume growth in food and cost savings.
It now forecasts full-year to end-February 2027 total underlying operating profit of between £1.025 billion and £1.065 billion, up from previous guidance, adjusted for the disposal of Argos, of £965 million to £1.065 billion.
Shares in Sainsbury's are up 11% so far this year.
($1 = 0.7461 pounds)
     

 (Reporting by James Davey; editing by Sarah Young)
 ((james.davey@thomsonreuters.com))