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J Sainsbury looked set for a bumper Christmas today, as it shrugged off talk that it is losing market share and posted a sharp rise in sales and profits.
The UK's third-biggest supermarket group made profits of £307 million in the half year to October, an 18.5% rise and at the top end of City forecasts.
That allows it to increase its interim dividend by 11% to 4p and keep quiet shareholders who are pondering a takeover offer.
The state of Qatar owns 26% of the stock and has made at least one bid for the company.
Under chief executive Justin King Sainsbury's has been reborn, winning back the affection of middle-class shoppers after a period in the doldrums.
The chain also surprised analysts by thriving in the recession, having moved quickly to promote discount deals and offers such as “feed your family for a fiver”. King dismissed a report from Nielsen claiming that Sainsbury's sales are growing more slowly than Tesco, Asda or Morrison.
He pointed to like-for-like sales up 5.7% in the six months, with total sales up 3.7% to £11.1 billion.
“The TNS market share figures are much more accurate,” he said.
Last month Tesco boss Sir Terry Leahy claimed to be taking share from Sainsbury's but King said today: “I thought it was a throwaway remark which the data doesn't really back up.”
He remains cautious about the wider economy.
“I said before that it was too early to call the turn and I was right to be cautious. Christmas will be strong because it is Christmas, then the next two quarters will be vital for showing where we all are,” he said.
In the summer Sainsbury's raised £445 million from the City to fund its aggressive expansion plans. It wants to have 15% more floor space by 2011.
“Having raised the money, I think we can talk with some confidence about the future,” said King.
Retail analysts say the supermarket chains are gearing up for a Christmas price war to eclipse all others. Small business leaders say that what this means in practice is discounts on luxury items and higher prices for basics, which hurts poor families and pushes local grocers out of business.
Sainbury's shares moved up 8p to 335½p this morning as the City digested the numbers.
JPMorgan analysts think the shares are worth 370p and is urging clients to buy. “We believe its non-food offer has the most upside in the sector,” says Rickin Thakrar at JPMorgan.
