FTSE 100 Round-Up: J Sainsbury, Barratt Developments

FTSE 100 shares Sainsbury’s and Barratt Developments have both fallen following the release of fresh trading updates on Wednesday. Here are the main takeaways from their latest statements.

J Sainsbury

The Sainsbury’s share price has dipped 2% despite the company raising its profits forecasts for the financial year.

The supermarket — which also owns the Argos general merchandise business — said that it enjoyed record sales over the Christmas period, helped by the FIFA World Cup as people stayed at home.

As a consequence Sainsbury’s said underlying pre-tax profit would come in at the higher end of a £630 million to £690 million range.

Retail free cash flow is also expected to come in at around £600 million during the 12 months to March. This is up from previous guidance of £500 million.

Sainsbury’s said that “Christmas and third quarter grocery volume performance [was] ahead of the market for the third consecutive year, driven by investment in value, innovation, service and availability.”

It added that “General merchandise [grew] stronger than expected, reflecting market share gains^{as customers trusted Sainsbury’s and Argos for value and the speed and certainty of Argos Fast Track delivery and Click & Collect.”}

Group sales excluding petrol station revenues rose 5.2% in the 16 weeks to 7 January, it said, with grocery and general merchandise sales increasing 5.6% and 4.6% respectively.

On a like-for-like basis sales were up 5.9% in the third quarter.

J Sainsbury’s update revealed that shoppers are becoming savvier with their cash due to the cost-of-living crisis. Chief executive Simon Roberts noted “customers shopped early, buying Christmas treats and fizz more than once and looked for deals, taking advantage of Black Friday and other seasonal offers.”

He warned that “money will be exceptionally tight this year [and] particularly as many people wait for Christmas bills to land,” adding that “we are working together with our suppliers to battle cost inflation.”

Barratt Developments

Barratt Developments’ share price dropped 1% in midweek trading as the company warned of “a marked slowdown” in the British housing market.

The FTSE 100 builder said that its net private reservations per week dropped to 155 in the second half of 2022 from 259 a year earlier. The number of net private reservations per active outlet each week fell to 0.44 from 0.79.

Barratt said that the private net reservation rate per average week showed “a sequential slowdown” between July and December. A rate of 0.6 through to 28 August dropped to 0.48 during the to 9 October, it said, and then fell to 0.3 in the remainder of the period.

Meanwhile the company’s forward order book (including joint ventures) slumped to 10,511 homes from 14,818. The value of the order book dropped to £2.5 billion from £3.8 billion previously.

David Thomas, chief executive of Barratt said that “political and economic uncertainty impacted the first quarter.” He noted that these problems were compounded “by rapid and significant changes in mortgage rates which reduced affordability, homebuyer confidence and reservation activity through the second quarter.”

Thomas added that “our business remains fundamentally strong, both operationally and financially, with an experienced leadership team, a strong net cash position and a resilient and flexible business model.” Barratt had net cash of £965 million as of December.

The company described the outlook for the second half of its financial year as “uncertain,” adding that “our full year out-turn will depend on how the market evolves in the early months of 2023.”

Barratt said that it has taken a number of steps in response to market conditions. These include “significantly reducing land approvals, pausing recruitment of new employees and introducing further controls for new site openings to manage our working capital deployment.”

It commented that “reservation activity in the first quarter of the new calendar year will determine whether any further action will be required”.

Royston Wild owns shares in Barratt Developments.