Profit forecast upgrade for Sainsbury 8217 s

Sainsbury's has announced that its full-year profits were set to be better than expected – and this has led to an increase in share value.

On Wednesday (September 30th), shares in the big-four supermarket jumped 12 per cent, even though the company reported its seventh consecutive quarter of falling underlying sales.

Like-for-like sales in established stores fell 1.1 per cent, excluding sales of fuel. While this figure has gone down, the decline is slowing and the volume of food each customer purchases is going up. Total sales excluding fuel were up 0.3 per cent.

The supermarket said food inflation had impacted many categories of the business, but that it was making good progress. It now expects full-year underlying profits to be "moderately ahead" of analysts' expectations of £548 million. Last year, underlying profits were £681 million.

During the quarter, Sainsbury's also opened 27 convenience stores and reported that clothing sales were up almost 13 per cent.

Commenting on the update, chief executive Mike Coup said that both volume and transactions grew. In addition, the decline in average basket spend in supermarkets has continued to stabilise.

Strategy

Mr Coup admitted that the market was "clearly still challenging", particularly with food deflation impacting many categories.

However ha added: "We are making good progress on delivering our strategy."

Some of the company's new strategies include having fewer special offers and focusing on providing lower regular prices. BBC business editor Kamal Ahmed explained that a benefit of offering fewer promotions is that there won't be as many surges in demand for products – and this means that supply chain management will be cheaper and more efficient.

Sainsbury's has also been working to make its products more appealing – such as improving the taste and texture of its juice ranges and ensuring its fruit and vegetable products are high-quality and ripe.

The firm has also recently announced a four per cent pay rise for shopfloor staff.