Sainsbury Raises Its Profit Forecast For 3rd Quater After Strong Sales
J Sainsbury, which is a major retail giant, has recently announced positive news about its expected cash flow and profit forecast. According to Sainsbury, it enjoyed a strong sales season from its core grocery section.
Sales growth was around 5.9% for the year during the three months. On the other hand, sales growth was only 3.9% during the previous quarter.
According to experts, the waning demand for consumer durables and lower fuel prices has allowed consumers to focus on buying more during the holiday season.
That's why many believe that the current situation of inflation in the UK is driven by major companies. These companies have been improving their profit margins in line with the higher input costs. This means that when the economy slows down, inflation will also reverse pretty quickly.
More Than 600 Million Profit Is Expected
Based on the recent results, Sainsbury believes that its profit forecast will be somewhere between 630 to 690 million. Similarly, the cash flow of Sainsbury is expected to be 600 million. Earlier, the guidance was pointing towards a number of 500 million only.
But despite the improved fundamentals, Sainsbury shares still turned downwards during the trading session. According to analysts, this has to do with the financing cost of 15 million. However, most of it has already been given away via higher wages.
For now, the performance of Sainsbury is showing a sharp divergence between the Argos household goods and the supermarket business.
Overall, there was an increase of 12.5% in grocery sales which is one of the fastest growths in a long time. On the other hand, the sales arising from general merchandise were down by 15%. Similarly, the sales from Argos were also down by 5%.
It seems that Sainsbury has really benefited from the recent holiday season. But let's not forget that the profit numbers might be skewed due to the temporary increase in consumer spending during the holiday season.