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Sainsbury Gets Boost From Shoppers Who Fueled Morrison Bids

Sainsbury Raises Profit Outlook Again Amid Strong Online Demand

J Sainsbury Plc raised its profit forecast, underlining the bullish trends for U.K. supermarkets that have focused private equity bidders’ attention on the grocer’s smaller rival, Wm Morrison Supermarkets Plc.

Sainsbury expects to generate profit of 660 million pounds ($917 million) this fiscal year, up from a previous forecast of 620 million pounds and exceeding pre-Covid levels, the grocer said in a statement Tuesday.

The performance of Britain’s second-largest supermarket helps explain why buyout firms are circling the industry. Until now, the companies have been valued relatively cheaply despite a surge in growth and increased cash generation during the lockdowns.

There’s a lot of interest in the sector, Simon Roberts, Sainsbury’s chief executive officer, said on a call with reporters. “There has been a lot of discussion about the sector being undervalued for a very long time.”

Three buyout firms have bid or expressed interest in Morrison, just months after the 6.5 billion-pound buyout of Asda, the country’s third-largest grocer.

Sainsbury reported better-than-expected sales of grocery, clothing and general merchandise, with comparable sales rising 1.6% in the 16 weeks to June 26. The grocer was facing a tough comparison with last year when sales soared as people stockpiled at the start of the pandemic.

Internet sales rose 29% during the period, although Sainsbury said online demand was gradually coming down from peak levels during the pandemic. “Shoppers are slowly starting to return to more normal shopping patterns as restrictions ease,” Roberts said.

U.K. online grocer Ocado Group Plc on Tuesday reported first-half profit that topped analysts’ estimates.

Sainsbury shares rose as much as 1% in London trading, while Ocado climbed as much as 4%.

Sainsbury said it’s using some of the profit benefit from improved sales to lower prices, particularly in the fresh produce, meat and dairy categories.

©2021 Bloomberg L.P.