By James Davey
UK supermarket group Sainsbury’s talked up its prospects with or without Asda, the close rival it has agreed to buy, after beating forecasts with a 20% rise in first-half profit.
The £7.3bn (€8.3bn) deal to buy the UK arm of Walmart, a transaction that could see the combined group leapfrog Tesco as Britain’s biggest retailer, is being assessed by the Competition and Markets Authority (CMA). The CMA said last month it expected to issue provisional findings early next year.
Sainsbury’s and Asda have both said they believe the CMA will not insist on a level of store disposals that will make the deal, announced in April, unattractive. However, the deal could affect Irish food firms selling into Britain, experts have said.
“We remain confident in the case that we’re making to the CMA,” said chief executive Mike Coupe, noting Sainsbury’s “key and central” argument was that the deal would lower prices for customers.
The CEO also told reporters that Sainsbury’s was on the right track in a sector that has faced pressure from the rise of discount chains and fears that online shopping giants could muscle into the territory.
“We have a clear strategy and you can see in the numbers today we’re delivering against that strategy. We’re adapting our business to changes in customers’ behaviour and we’ll continue to do so,” he said.
“We’re confident in our future whatever basis that future is.” Coupe has already reshaped the group by buying general merchandise retailer Argos for 1.1 billion pounds in 2016.
Although industry data shows Sainsbury’s trading performance is lagging rivals, its shares are up 32% this year on the back of the Asda proposal. The shares were little changed in the latest session.
Sainsbury’s made an underlying pretax profit of £302m in the 28 weeks to September 22 — ahead of analysts’ mean forecast of £280m. Group sales rose 3.5% to £16.9bn and the interim dividend was held at 3.1 pence per share. While like-for-like sales, excluding fuel, increased by just 0.6%, the group benefited from delivering £63m of synergies at Argos ahead of schedule.
Sainsbury’s opened 60 Argos stores in its supermarkets in the half, taking the total to 251.
“The success of the Argos integration shows Coupe and his team are able to spot M&A opportunities and execute them well,” said Hargreaves Lansdown analyst Laith Khalaf.