SUPERMARKET giant Sainsbury's posted a 24 per cent increase in annual profit to £488 million yesterday, as it revealed that the group plans to boost non-food sales, partly through the launch of a new online venture.
The supermarket chain said it will be rolling out its online non-food website next year after spending £15m on its development this year and £15m next.
Sainsbury's said it was also strengthening the chain's in-store non-food offering.
However,
Sainsbury's shares closed down 3.9 per cent, or 15.2p, at 374.5p after Darren Shapland, its chief financial officer, said he expected analysts to cut profit forecasts by £25m as a result of the online expenditure.
Justin King, Sainsbury's chief executive, said yesterday that the group last achieved 13 consecutive quarters of like-for-like sales growth – the figure it has just recorded – in the 1980s.
Same-floorspace sales rose 3.9 per cent in the year to 22 March. Sainsbury's overall sales rose 5.8 per cent to £19.3 billion in the year, while the dividend for the year rises 23 per cent to 12p (9.75p).
King played down fears of a consumer downturn in the high street working its way through to the food retailers.
He acknowledged that consumers were tightening their belts, but added: "We are miles off anything you can technically call a recession.
"I'm absolutely convinced we will work ourselves into a bad place if we make out it is worse than it really is."
However, food retailing analyst Nick Bubb at broker Pali International, was more cautious. He said: "Today's final results contain lots of waffle about 'making Sainsbury's great again', but it is not clear how well the business's premium positioning will stand up to the tougher consumer climate that is fast developing"
However, Freddie George of Seymour Pierce, said he was raising his rating to "buy", arguing for Sainsbury's online expansion potential and expectations of a renewed bid approach from the Qatari Investment Authority which owns 25 per cent of Sainsbury's shares.
A bid restriction on Qatari fund Delta Two lapsed this month, six months after the group dropped bid plans for Sainsbury's last October as the credit crunch began to bite.
King added that the group had beaten its three-year targets, increasing sales by £2.7bn in the three years to March 2008 compared with a target of £2.5bn – helped by lower prices and strong sales of fresh and premium foods.
King said Sainsbury's focus would remain on the UK rather than international expansion as it believed there still remained many domestic opportunities for growth.
The full article contains 443 words and appears in The Scotsman newspaper.
