UK's Sainsbury's targets 10% profit growth as it wins more shoppers

2023/24 pretax profit up 1.6%, above company guidance

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Forecasts 2024/25 retail op profit growth of up to 10%

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Expects to continue to outperform the grocery market

LONDON, April 25 (Reuters) - Sainsbury's, Britain's second largest supermarket group, forecast up to 10% growth in retail operating profit in its new financial year, confident it can continue to win more customers from rivals.

The group, which has a 15.3% share of Britain's grocery market trailing only Tesco, beat company guidance for profit in its 2023/24 year as it outperformed the wider market.

Sainsbury's and Tesco, which this month also forecast a rise in profit this year, are pulling away from traditional rivals Asda and Morrisons, which are hamstrung by high debt.

Under CEO Simon Roberts, Sainsbury's has matched discounter Aldi's prices on essential items and provided better offers for members of its Nectar loyalty scheme, financed by cutting 1.3 billion pounds ($1.6 billion) of costs over the last three years.

In February it set a new three-year cost savings target and vowed to step-up capital expenditure and boost returns for shareholders.

Monthly industry data published on Tuesday showed Sainsbury's was the fastest growing of Britain's traditional supermarkets, with its market share up 40 basis points year-on-year.

"We're really encouraged by the momentum we've got in the business," Roberts told reporters on Thursday, noting recent evidence of UK consumers starting to "trade up" to pricier food products but still cautious on general merchandise purchases.

For the year ended March 2, Sainsbury's posted underlying pretax profit of 701 million pounds - ahead of guidance 670-700 million pounds and the 690 million pounds made in 2022/23.

"We are confident of delivering strong profit growth in the year ahead," Sainsbury's said, guiding to retail underlying operating profit of 1.01-1.06 billion pounds, growth of 5-10%.

Shares in Sainsbury's were, however, down 2% in morning trading, which analysts said reflected a weaker performance from general merchandise and a forecast for lower profits from financial services, which the group is winding down.

Sainsbury's total sales in 2023/24 were up 3.4% at 36.3 billion pounds, with fourth quarter like-for-like sales, excluding fuel, up 4.8%.

In grocery, the group said it also benefited from new product launches that tapped into the continuing trend of consumers entertaining at home more rather than eating out.

It launched nearly 1,200 new products in the year and sales of its premium 'Taste the Difference' range increased 12%.