Sainsbury’s, the UK’s second largest supermarket, has said it expects to report underlying pre-tax profits of at least £720 million for the year ended March 2022.

The profit guidance is up on the £660 million predicted by the retailer for the 12-month period in July last year.

The company said that this was a result of investment in the customer proposition and higher operating cost inflation being offset by structural cost savings and “stronger than expected” grocery volumes, driven partly by an increase of in-home grocery consumption.

The retailer’s third quarter trading statement for the 16 weeks to 8 January reported a decline in grocery sales of 1.1 per cent in comparison to 2020, when the UK was in a national lockdown. However, compared to pre-pandemic levels, they were up 6.6 per cent during the same period.

Overall retail sales growth – which includes grocery, general merchandise, and clothing - was down 5.3 per on the previous year. But sales were up by 1.4 per cent compared to 2019.

Sainsbury’s said that general merchandise and apparel sales were down year-on-year reflecting an “exceptional performance” in 2020, limited availability in key product areas, and its focus on profitable sales, including reduced promotional activity. It did say that Argos continued to benefit from strong margins during the third quarter, supported by “transformational” operating cost reductions.

Digital grocery sales were also down by 16.5 per cent in comparison to 2020, when there was an unprecedented shift to online shopping. In comparison to 2019, online sales surged by a whopping 92 per cent.

"The backdrop was challenging and our teams worked hard throughout the year to make sure we had all of the products everyone wanted,” said Simon Roberts, chief executive, Sainsbury’s. “Our suppliers did a great job in challenging conditions throughout the quarter and I thank them for all their support for our business.”

Roberts said that the supermarket chain had delivered a strong digital performance over the Christmas period, responding to a surge in demand for online deliveries and last-minute-online gift shopping at Argos.

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