British supermarket Sainsbury's forecast full-year profit at the upper half of previous guidance as it reported slightly better-than-expected flat profit for the first half, saying it was growing food volumes and winning market share from competitors.
The group, which has a 15% share of Britain's grocery market, trailing only Tesco (TSCO.L), also said on Thursday it was well placed for the key Christmas season.
"With just over 50 days to go, we're carrying really fantastic momentum into this peak trading season, and we're really ready to deliver another strong Christmas," CEO Simon Roberts told reporters.
Sainsbury's shares rose 5% in morning trading, extending 2023 gains to date to 26%.
Roberts said Sainsbury's (SBRY.L) had achieved "a step change" in its value perception amongst consumers, winning market share for the first time from discounters Aldi and Lidl.
The group is matching Aldi's prices on key items and providing better prices to members of its Nectar loyalty scheme.
It has also benefited from consumers looking to save money by cooking and entertaining at home rather than dining out.
"We're selling more food to more customers, and with bigger trolleys and baskets," Roberts said.
The group now expects 2023/24 underlying pretax profit of between 670 million pounds and 700 million pounds ($816 million-$852 million). That compares with previous guidance of 640-700 million pounds, and the 690 million pounds made in 2022/23.
Sainsbury's said it also expected to generate retail free cash flow of at least 600 million pounds - higher than its previous guidance of at least 500 million pounds.
So far this year, despite high inflation and a sharp rise in mortgage borrowing costs, UK consumer demand has generally held up.
Annual food inflation was 12.1% in September, according to the most recent official data, though prices did fall on the month for the first time in two years.
"I'm pleased to say food inflation is coming down, and we are passing savings on to customers," the CEO said.
For the 28 weeks to Sept. 16, underlying pretax profit was 340 million pounds, unchanged from the same period last year and ahead of analysts' average forecast of 335 million pounds.
Second-quarter like-for-like sales, excluding fuel, rose 6.6%, having been up 9.8% in the first quarter. Second-quarter grocery sales rose 8.9%, driven by volume growth.
However, general merchandise sales fell 2.6%, reflecting unhelpful weather and the closure of Argos stores in Ireland, while clothing sales fell 14.6%%. Sainsbury's also noted "headwinds" in financial services.
Last month, Tesco raised its annual profit forecast.
($1 = 0.8214 pounds)
