# Christmas fizz prompts UK’s Sainsbury’s to lift profit guidance
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-01-11
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Sainsbury's forecasts upper-end profit after strong
Meta Description: Sainsbury's predicts full-year profit at upper end of guidance after robust festive trading despite cost-of-living crisis and tough retail environment.
URL: https://financedigest.com/christmas-fizz-prompts-uks-sainsburys-to-lift-profit-guidancehtml

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By James Davey

LONDON (Reuters) -Sainsbury’s, the first listed British supermarket to update on Christmas trading, forecast full-year profit at the upper end of its guidance after shoppers spent more than expected on festive treats despite a deepening cost-of-living crisis.

Ahead of Christmas, European retailers worried the trading period could be the worst in at least a decade.

But Sainsbury’s 5.9% rise in underlying sales for the Christmas quarter, backed up industry data showing a record festive performance from Britain’s grocers, who likely gained [share of overall spend](https://www.financedigest.com/cisco-forecast-raise-allays-tech-spending-fears-lifts-shares.html "Cisco forecast raise allays tech spending fears, lifts shares") from non-food retailers.

British [inflation at 10.7% is among the highest in the developed world and consumer confidence close to record](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc-2.html "UK shop price inflation hits record 8% in January: BRC") lows, but retailers that have reported so far have performed well.

Chief [Executive Simon Roberts said UK households managed](https://www.financedigest.com/aon-benfield-launches-managed-care-services-platform-with-the-appointment-of-three-key-executives.html "Aon Benfield launches Managed Care Services platform with the appointment of three key executives") their budgets differently, hosting larger gatherings after two years of pandemic restrictions and treating themselves at home rather than going out.

Customers shopped early, buying Christmas treats and fizz more than once and looked for deals, taking advantage of Black Friday and other seasonal offers,” he said, highlighting [record sales](https://www.financedigest.com/inflation-drives-britains-record-christmas-grocery-sales.html "Inflation drives Britain’s record Christmas grocery sales") of Champagne and prosecco.

He said sales of [technology products were strong in the run up to the soccer World](https://www.financedigest.com/is-wearable-technology-ushering-in-a-brave-new-healthy-world.html "Is wearable technology ushering in a brave new healthy world?") Cup.

However, Roberts was cautious on the consumer backdrop as people face an even tighter squeeze on their finances in 2023, as taxes and mortgage rates rise and UK government support on household energy bills is [scaled back](https://www.financedigest.com/mifid-ii-why-you-should-not-scale-back-your-implementation-efforts.html "MIFID II: WHY YOU SHOULD NOT SCALE BACK YOUR IMPLEMENTATION EFFORTS").

We understand money will be exceptionally tight this [year particularly as many people wait for Christmas](https://www.financedigest.com/scam-special-how-to-avoid-christmas-shopping-fraud-this-year.html "Scam Special: How to Avoid Christmas Shopping Fraud this Year") bills to land,” he said.

[SHARES DOWN AFTER STRONG](https://www.financedigest.com/asia-shares-slip-dollar-strong-as-yuan-weakens.html "Asia shares slip, dollar strong as yuan weakens") RUN

Sainsbury’s, Britain’s second largest supermarket chain with a 15.5% share of the country’s grocery market, ranked only behind Tesco, said 2022-23 underlying pretax [profit was expected](https://www.financedigest.com/portuguese-airline-tap-swings-to-profit-earlier-than-expected.html "Portuguese airline TAP swings to profit earlier than expected") to be towards the upper end of the previous range of 630 million and 690 million pounds ($767-$840 million).

That compares with the analysts’ consensus of 644 million [pounds](https://www.financedigest.com/incentive-qas-expands-retail-portfolio-with-million-pound-shopping-centre-contract.html "Incentive QAS Expands Retail Portfolio With Million Pound Shopping Centre Contract") and the 730 million pounds it made in 2021-22.

The group’s shares were down 1.5% in morning trading, reflecting a [strong run ahead](https://www.financedigest.com/italys-mps-sees-safe-habour-ahead-after-strong-quarter.html "Italy’s MPS sees ‘safe habour’ ahead after strong quarter") of the update. They are up 9.3% over the [last month](https://www.financedigest.com/fintech-trends-to-look-out-for-during-the-last-six-months-of-2019.html "Fintech trends to look out for during the last six months of 2019").

Sainsbury’s said total [retail sales](https://www.financedigest.com/italy-inflation-adjusted-retail-sales-fell-in-2022.html "Italy inflation-adjusted retail sales fell in 2022") over the 16 weeks to Jan. 7, excluding fuel, rose 5.2%, reflecting inflation and “relatively resilient volume trends”.

Grocery [sales rose 5.6%, while general merchandise sales increased](https://www.financedigest.com/increase-in-sales-of-human-insulin-market-to-scale-revenue-growth-in-the-global-market.html "Increase in Sales of Human Insulin Market to Scale Revenue Growth in the Global Market") by a better-than-expected 4.6%.

[“Investment in value](https://www.financedigest.com/procurementin-european-private-equity-investment-adding-value-to-the-boardroom.html "Procurement in European private equity investment – adding value to the boardroom."), innovation, service and product availability delivered stronger volume trends across grocery and general merchandise, particularly at Christmas,” Roberts said.

He said Sainsbury’s’ general merchandise [business Argos benefited](https://www.financedigest.com/5-ways-cfo-and-cio-collaboration-can-benefit-the-business.html "5 Ways CFO and CIO collaboration can benefit the business") from its reliability and convenience when train and postal strikes disrupted Britain over the Christmas period.

To try to contain prices, Sainsbury’s is spending 550 million [pounds over the two years](https://www.financedigest.com/commonenergy-mistakes-costing-homeowners-hundreds-of-pounds-each-year.html "Commonenergy mistakes costing homeowners hundreds of pounds each year") to March 2023, funded by cost savings, to encourage shoppers not to switch to discounters Aldi UK and Lidl GB, both of which have reported bumper Christmas sales.

John Moore, senior investment manager at RBC Brewin Dolphin, said Sainsbury’s was [reasonably well-placed “in terms of the balance of its business offering and still has levers to pull in property and further cost and efficiency savings](https://www.financedigest.com/five-reasons-to-start-saving-early-for-higher-education.html "Five Reasons to Start Saving Early for Higher Education"), giving it the opportunity to keep pace with competitors and reinvest in product pricing.

Tesco updates on trading on Thursday, with analysts also expecting it to have performed well.

(Reporting by James Davey; editing by William James, Jason Neely and Barbara Lewis)


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