Sainsbury’s synergies from Argos deal helps boost profits

Sainsbury’s warns over consumer outlook as half-year profits rise

Sainsbury’s warns over consumer outlook as half-year profits rise

Shares in J Sainsbury (LON:SBRY) have jumped in London this morning, as the blue-chip grocer posted a rise in sales for the first half of its financial year.

For its first half to 22 September, Sainsbury's made an underlying pretax profit of £302 million - ahead of analysts' mean forecast of £280 million and the £251 million made in the same period previous year.

Half-year profits, however, slumped by 40% to £132 million due to restructuring and a bevy of one-off expenses related to Argos integration, Sainsbury's Bank transition and the proposed merger with Asda.

The hot summer has helped Sainsbury's to profit and sales growth, but the supermarket warned of an uncertain consumer outlook heading into the key Christmas season.

Sainsbury's said that while like-for-like sales, excluding fuel, increased by just 0.6 per cent, it benefited from cost savings of 121 million pounds - some 63 million of which were synergies from the Argos business Sainsbury's purchased in 2016.

Although industry data shows Sainsbury's trading performance is lagging rivals, its shares are up 32 percent this year on the back of April's agreed 7.3 billion pounds takeover of Walmart owned Asda - a deal that could see the group leapfrog Tesco as Britain's biggest retailer. The World Cup and barbecue weather over the summer provided a welcome shot in the arm for the supermarket, though without this seasonal stimulus, sales growth from existing outlets wouldn't look great.

China export growth surprisingly strong in Oct.
China's overall trade - what it buys and sells with all countries including the U.S. - logged a $34 billion surplus for the month. The country's cumulative trade surplus with the the first 10 months of the year was $258.15 billion, Reuters reported.

This meant comparable store sales rose 0.6 per cent overall in the half-year.

Mike Coupe, Sainsbury's group chief executive, noted that the retailer was transforming its business to meet rapidly changing customer needs.

He said the group continued to "engage constructively" with the competition watchdog amid an in-depth probe of its planned tie-up with Asda.

Despite this, Sainsbury's remains on track for full-year expectations, with analysts pencilling in underlying pre-tax profits of about £634m.

It opened a further 60 Argos stores in its supermarkets over the six months, bringing the total to 251.

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