Shares in J Sainsbury (LON:SBRY) have lost more than three percent in London this morning, as the blue-chip grocer revealed that its profits had fallen in the first half of its financial year. While Britain’s second-biggest supermarket recorded higher sales, profits were pressured by the integration of Argos and higher pay for staff.
As of 09:23 GMT, Sainsbury’s share price had lost 3.21 percent to 226.00p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.09 percent lower at 7,522.62 points. The group’s shares have lost more than five percent of their value over the past year, and are down by just under 10 percent in the year-to-date.
Sales rise, profits fall
Sainsbury’s said in a statement this morning that its sales had climbed 17 percent to £16.3 billion in the first half of its financial year, primarily reflecting the full consolidation of Argos during the reported period. The consolidation, however, bit into the grocer’s profits, alongside previously guided price investment and wage cost inflation, reducing the company’s underlying profit before tax by nine percent to £251 million. Underlying earnings per share meanwhile dipped 22 percent.
“We have delivered a good performance across the Group in the last six months, with more customers choosing to shop at Sainsbury’s in the first half than ever before,” Sainsbury’s chief executive Mike Coupe commented in the statement, adding that the grocer was proceeding with Argos’ integration, with 112 stores open in Sainsbury’s supermarkets and 165 to be open by Christmas.
“Profit has come in ahead of consensus expectations but this is a mixed bag result that’s far from perfect,” Fiona Cincotta, senior market analyst at City Index, told The Times. “On the bright side, Sainsbury’s is running well ahead of its cost-saving targets following the Argos acquisition. But that progress has been offset by a significant slump in sales growth.”
The FTSE 100 grocer’s results come after Marks & Spencer (LON:MKS) posted its interims yesterday, cautioning that it was facing headwinds at its Food business.