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Sainsbury's bounces back with 27% increase in profits

Published:  23 July, 2008

Sainsbury's has bounced back from the failed takeover bid from Delta Two to report a 19.6% increase in pre-tax profilts to 232m for the six months to October 6

Total retail sales rose by 4.7% to 9.998bn, while like-for-like sales growth (excluding fuel) was 4%. As well as its pre-tax profit rise, its underlying profits before tax rose by 27% to 240m.

It has now delivered 11 consecutive quarters of like-for-like growth.

But the company also revealed that the protracted takeover talks with Qatari-backed investors Delta Two had cost it 7m in one-off costs.

Chairman Philip Hampton said: "Our recovery is well advanced and ahead of plan. Since March 2005, we have grown sales by 2.3bn and we are ahead of our target to reach 2.5bn by March 2008."

He added: "These results demonstrate our continued ability to grow the business. Sales growth has remained ahead of the market with a good first half performance towards the new targets outlined in May 2007."

Justin King, chief executive, said: "We now have 16.5 million customers each week and in the first half we grew like-for-like sales excluding fuel by 4.% despite tough comparatives from the previous year and challenging weather conditions during the summer. This takes our recovery plan into its third and final year and builds on the excellent results delivered last year."

Sainsbury's said it had also made a good start to its new "recovery to growth" targets announced in May 2007. It is aiming for 3.5bn of additional sales by 2010 and space growth of 10%.

Two-thirds of the targeted growth is from grocery sales, but 50% of the new space will be dedicated to non-food and the company said it was now confident in its ability to trade stores over 70,000sq ft.

The company said its own-brand clothing range, TU, was on track to achieve sales of more than 300m this year. It was introduced to 13 more stores during the first half and is now in 262 stores. Sainsbury's is now the UK's 11th-largest clothing retailer by volume.

Online sales increased by more than 40%, with customer orders hitting 80,000 a week. The online service is now available to 83% of UK households and in the first half a further 23 stores started running the service, taking the total to 137 stores.

Sainsbury's is targeting 200 stores to be offering the online service by March 2010.

On the property front, Sainsbury's also today announced a joint venture with property firm Land Securities that will own the freeholds to three stores at a market value of 113m.

The company said: "These sites have significant development potential beyond standard extensions and will use Land Securities' development expertise." Similar partnerships will be considered in future.

Over the next three years, the company is targeting completion of 75 extensions and 190 refurbishments.

During the first half of this year, Sainsbury's opened three supermarkets and extended a further nine. Two stores closed and 20 were refurbished.

In the second half, it plans to open 12 supermarkets, of which 10 relate to stores acquired recently from Kwik Save.

Eleven convenience stores opened in the first half and 25 will have opened by the end of the financial year, including five ex-Kwik Save sites.