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Business News

Sainsbury's overtakes Asda to become second-largest UK supermarket as profits soar 9%

Company now accounts for 16.8% of the market

Sainsbury's has reported a surge in profits compared to last year, with a pre-tax haul of £400 million in the six months to the end of September up 9 per cent on 2012.

It was the best performing of the so-called "big four" supermarkets, and the only one to have increased its market share in the period. Tesco, Asda and Morrisons have all suffered from competition with discount brands Aldi and Lidl.

Sainsbury's has now achieved 35 back-to-back quarters of growth in sales, with own-brand sales rising twice as fast as branded products. Its Taste the Difference range has seen growth into double figures.

Total sales for the half year to 28 September rose 4.4 per cent to £13.9 billion. Convenience stores performed best, up 20 per cent in the period, while online sales rose by 15 per cent.

It now accounts for 16.8 per cent of the market, and has overtaken Asda to become the second-largest supermarket in the UK behind Tesco.

The company added 393,000 square feet of new space through six supermarkets, 50 convenience stores and two extensions.

Not including new stores, sales rose by 1.4 per cent on a year earlier, although the chain expects this rate to come under pressure as it faces tougher comparables with a year earlier.

Chief executive Justin King also warned that customer budgets remain tight and that the economic recovery may take time to translate into stronger household confidence.

Shares were more than 1 per cent higher today after the half-year profits figure came in at the top end of City forecasts.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "Without question, this is a strong performance from a resurgent Sainsbury, even though clouds remain on the investment horizon."

He warned that intense competition, commodity prices and the company's sole UK focus limited its scope for further expansion.

The company is on track to meet its full-year target for one million square feet of new space but said a review of its property pipeline has identified some sites where it no longer wants to build a supermarket. This resulted in a one-off write-down of £92 million in today's results.

Additional reporting by PA