Sainsbury 8217 s shares rise 2 2 after profits top forecasts

Sainsbury’s shares jumped straight to the top of the FTSE 100 leader board on Wednesday after the supermarket firm reported a 7% jump in underlying pre-tax profits to £400m for the first half of the year.

That figure came in at the top end of market consensus expectations of between £390m and £400m, giving a strong result to shareholders and triggering some brokers into upgrading their views and price targets as a result.

Revenues for the first half grew by 4.4% to £13.95bn, while Sainsbury’s share of the UK market stood at 16.8%; the strongest share in a decade. Like-for-like sales grew by 1.4%, meaning sales grew for the 35^th consecutive quarter – an outstanding achievement.

Sainsbury’s continues to be a beacon

Sainsbury’s continues to be a beacon in the grocery sector and makes for an interesting comparison with the difficulties Tesco are having, who reported a 1.5% fall in profits for the same first half of the year.

At a time when Tesco continues to struggle as the pace of its turnaround has slowed significantly (raising fears it will struggle to regain lost market share), the fact Sainsbury’s is fast cementing its own market share and threatens to topple Asda’s number 2 spot creates a striking contrast. That’s why shareholders have to be delighted with Sainsbury’s performance.

And if they’re not – despite Sainsbury’s hiking dividends by 4.2% to 5p and confirming that it expects like-for-like sales to be between 1% and 1.5% as well as mid-single digit growth in operating margin for 2013/14 – some shareholders must have unrealistic expectations.

UK retail sales data out tomorrow is expected to show sales barely grew in October, marking a slowdown from 0.6% a month earlier. Despite signs the UK economy is recovering potentially faster than expected, this isn’t necessarily seeping straight through to UK consumers and, as such, Sainsbury’s performance as well as its Brand Match and Live Well for Less campaigns continue to give it great success.

Chart of Sainsburys (red) vs Tesco (blue) vs Morrisons (orange)