Proactive Investors - Strong half-year trading for J Sainsbury PLC (LON:SBRY) proves that the supermarket’s strategic shift to quality coupled with value has started to work, according to analysts.
Following market share gains and strong grocery sale volume growth during the half-year to September, analysts suggested Sainsbury’s had finally lifted itself out of what was an awkward middle ground in the supermarket sector.
This had seen it “more expensive than Asda, Tesco PLC (LON:TSCO) and the discounters,” AJ Bell’s Russ Mould explained, “but not as pricey as Waitrose”.
Cash-strapped customers, nor those with change to spare, were likely to have chosen Sainsbury’s in the past, therefore, he added.
Simon Robert’s appointment as chief executive in 2020 looks to have changed this though, with Thursday’s positive results largely welcomed as a result of his bid to revise its offerings.
According to Mould, this focus on quality products at good rates - which comes as £118 million was spent on keeping prices down since March - has seen it become the next stop for the value-seeking Waitrose shopper, but also for those on tighter budgets looking for a treat.
This translated to a 10.1% growth in grocery sales volumes over the half year for Sainsbury’s, which drove a 2% increase in retail operating profit to £485 million.
Sainsbury’s itself labelled the resultant market share gains to around 14.8% - as per Kantar - as a record.
“Customers are noticing and they're doing more of their grocery shopping with us, trusting us to deliver consistent value as well as great quality,” the supermarket said.
Now, with Christmas rapidly approaching, analysts said the supermarket’s focus had to be as strong as ever to stay competitive.
“The ferocity of competition, particularly in the supermarket arena, is well established and shows little sign of abating,” interactive investor’s Richard Hunter said.
“The group will need to keep a constant lid on prices in order to remain in the mix.”
Hargreaves Lansdown (LON:HRGV) analyst Sophie Lund-Yates pointed out that rivals would have “stepped up” their games too, leaving analysts watching the sector closely over the coming weeks.
“As belts are tightened, it could lead to customers being even more discerning about where their pennies are spent,” she said.
Shares in Sanisbury’s jumped 4.6% to 273.80p.