Wednesday, 8 May 2013

Sainsbury


Following on from a record breaking Christmas trading and reflecting 32 quarters of increasing like-for-like growth, todays impressive full year results should come as no surprise.

Total sales increased by 4.3% (excl. fuel) and 1.8% on a like-for-like basis. Underlying profits were up 6.2% to £756m.


Justin King, Chief Executive said:

"Our focus on helping our customers Live Well For Less is delivering good growth in sales and profit.  Our key points of difference, such as the best quality own-brand, Nectar, Brand Match, coupon-at-till and industry leading service, are recognised by our customers.

We continue to invest in offering customers choices of how they shop with us, bringing our food, clothing and general merchandise to more customers.

Our decision to take full ownership of Sainsbury's Bank will add further momentum to our strategy of developing complementary channels for the benefit of both customers and shareholders.

Whilst we see no near term change in the current economic situation, we remain confident that by continuing to invest in our long-standing strategy and by understanding and helping our customers, we are well positioned for future growth."

In addition to the traditional supermarket, they have over 500 convenience stores which have seen a 17% growth and revenues of £1.5bn. In addition the online business has grown 20% and sales are approaching the £1bn mark.

The dividend has been lifted 3.7% to 16.7p (16.1p 2012) which gives a forward yield of 4.2% at the current share price of 393p. The dividend cover has increased from 1.75x to 1.83x - the aim is to bring cover up to 2x over the medium term.

The shares could have been purchased for around 325p earlier this year so that’s an impressive 21% increase in the past 4 months. Panmure Gordon recently reviewed the company shortly after its 4th quarter announcement and placed a target price of 540p on the shares.

Following in the footsteps of its rival Tesco which took full control from a joint venture with RBS in 2008, Sainsbury has confirmed it will acquire full ownership of its banking business from Lloyds Bank for an agreed sum of £248m plus a cash injection of a further £40m net.

Hopefully this will not be a distraction to the main goal of regaining the number 2 slot it lost to Asda ten years back which heralded the appointment of Justin King as CEO.

I'm happy with progress so far and look forward to picking up the final dividend in July.

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