Profits up for Sainsbury as price war continues

published 9 November 2011

J Sainsbury, the owner of Britain's number three supermarket chain, has seen profits before tax rise to £354m in the first six months of this year, a 6.6% improvement on the same point last year and a touch above analysts expectations of around £350m.

The total sales figure was also strong, at £12,848m for the half year, significantly better than Charles Stanley's prediction of £11,750m

Like-for-like sales, which strips out new stores openings, were up 1.9% and the interim dividend was increased to 4.5p per share (up from 4.3p)

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These numbers are likely to see upside pressure on the stock come market opening although there are other issues facing the firm.

A key part of the Sainsbury strategy is to grow its estate to provide more space from which to extract earnings. In the first six months of this year it bought 596,000 square feet of new space and has seen the total value of its properties rise by £400m.

So far, so good, although analysts will be doing the sums on Sainsbury's margins as it goes toe-to-toe with Tesco via its price matching strategy.

Justin King, the Chief Executive of J Sainsbury said of today's results: "We have also made good progress in the development of our store estate. We have added a gross 596,000 sq ft of new space, with seven new stores (including two replacements), 15 extensions and 37 convenience stores, creating over 2,700 new jobs in the process."

He warned however that Sainsbury expects the economic climate "to remain challenging for the foreseeable future."