Sainsbury’s: Supply chain issues hit Christmas toy market

SAINSBURY’S raised its profit outlook after a strong Christmas despite supply chain challenges that affected toy and technology sales.

The supermarket giant said in its January 8 third-quarter trade update that overall sales fell during the period, but pointed out that grocery sales increased in key weeks around Christmas.

The retailer said sales of its general merchandise business, which includes Argos, fell 16% in the quarter.

However, he said cost reductions at Argos, driven by the group’s decision to close 420 brand branches, have helped boost its profit margins.

Sainsbury’s said “the decline in general merchandise sales reflects the impacts of both weak demand and limited supply in some key categories and our strategy to focus on profitable sales.”

“The tech, games and toys markets were all down double digits,” he said. “This reflects tough comparisons to last year’s lockdown and also the continued impact of global supply chain challenges on product availability.

“We have ensured strong food availability for Christmas, despite many challenges, benefiting from our scale, strong relationships with our suppliers and the adaptability of our supply chain and logistics operations.”

He told shareholders on Tuesday that grocery sales volumes and cost savings across the business had offset the impact of “higher operating cost inflation” and investments in the ‘business.

The retailer, which has around 100 outlets in Scotland, said total sales, excluding fuel, fell 5.3% for its latest quarter compared to the same period last year, but were 1% higher. .4% to pre-pandemic levels.

Trade in grocery products fell 1.1% from the same period last year, but was 6.6% above pre-pandemic levels.

He said grocery sales rose 0.1% year-on-year in the six weeks to Jan. 8.

Sainsbury’s said it should now post a pre-tax profit of at least £720m for the year to March.

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Simon Roberts, Chief Executive of Sainsbury’s, said: “It was a difficult time and our teams worked hard throughout the year to ensure we had all the products everyone wanted.

“Our suppliers did an excellent job in difficult conditions throughout the quarter and I thank them for all their support of our business.”

HeraldScotland: Source: London Stock Exchange.Source: London Stock Exchange.

He added, “More people were eating at home and our significant investment in value, innovation and service resulted in market share growth.

“At the same time, we are pleased to increase the earnings forecast for the full year.

“The context was difficult and our teams worked hard throughout the year to ensure that we had all the products that everyone wanted.”

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Mr Roberts said the retailer had reported an increase in no-shows in recent weeks due to the spread of the Omicron variant, but no-show rates were still “only half” of the peak rates the company said. experienced during the pandemic.

He added that Sainsbury’s will continue to pay all staff during isolation due to Covid-19, following Ikea’s decision to cut sick pay for unvaccinated staff affected by the virus.

Zoe Gillespie, head of investments at Brewin Dolphin, said: “UK supermarkets faced tough comparisons with Christmas 2020, when the lockdown caused a boom in food and drink sales, but the spread of the variant Omicron saw consumers stay away from bars and restaurants last year while doing well.

“Sainsbury’s continues to deliver excellent results thanks to the series of measures taken to improve business performance.

“Encouragingly, earnings forecasts have been lifted, cost savings are helping to stave off the effects of rising inflation and debt reduction is ahead of schedule. Even the supermarket banking operation is experiencing a turnaround.

“Although the specter of inflation remains, Sainsbury’s has the ability to manage this better than many other companies.”

Sainsbury’s shares closed 3.1% higher at 288p.

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