May 9, 2012
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Sainsbury profit climbs in tough UK market

May 9, 2012

LONDON - J Sainsbury, Britain's No.3 grocer, posted annual profit towards the top end of expectations as it lured cash-strapped shoppers to its cheaper own-brand ranges and tapped into growth areas like convenience stores and internet shopping.

Photo: J Sainsbury Plc

"Whilst the wider economic situation remains uncertain, we remain confident that our clear strategy, market insight and strong values will enable us to make further progress both in our core food and non-food businesses, as well as new channels and services in the year ahead," chief executive Justin King said on Wednesday.

Sainsbury's has said it is well placed to benefit from the roster of summer events - Euro 2012 soccer, the Queen's diamond jubilee, the Olympics and the Paralympics.

The group, which trails market leader Tesco and Wal-Mart's Asda by annual sales, said profit before tax and one-off items rose 7 percent to 712 million pounds in the year to March 17.

That compared with analyst forecasts in a range of 666-717 million pounds, with a consensus of 701 million pounds, according to a company poll, and 665 million pounds in 2010/11.

Sales rose 6.8 percent to 24.5 billion pounds, while the dividend was increased 6.6 percent to 16.1 pence.

Sainsbury's has been benefiting from the success of its "basics" and "Taste the Difference" own-brand ranges, as well as its "Brand Match" pricing promotion.

It has also been boosted by a drive to open stores outside its heartlands in the south of England and an expansion online as well as into convenience shops and non-food ranges like clothing and homewares.

Shares in Sainsbury, down 13 percent over the last year, closed on Tuesday at 305 pence, valuing the business at 5.75 billion pounds.

Many UK retailers are struggling as shoppers grapple with higher prices, muted wage growth and government austerity measures, and worry about job security, a shaky housing market and fallout from the euro zone debt crisis.

Data last month showed Britain is back in recession, prompting fears of a fresh fall in consumer confidence, while high oil prices have raised doubts about whether inflation will continue to fall back from last year's highs.

Separately on Wednesday surveys showed British retail sales posted their biggest fall in more than a year last month, while growth in the number of people placed in permanent jobs slowed, raising the risk of another quarter of economic contraction.

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