British supermarket chain Sainsbury's raised its full-year profit forecast today after posting a better than expected quarterly performance.
Sainsbury's, which has shown greater resilience to the rise of German discounters Aldi and Lidl than its big four rivals in the UK, said its sales were still down in the 16 weeks to September 26 but not as much as feared.
That put the group on course to beat its forecast for 2015-16 underlying profit before tax and sent its shares up 11%.
The news, following nearly two years of caution, also boosted the shares of rivals Tesco and Morrisons. Asda, the final member of the big four supermarkets, is owned by Wal-Mart.
"During the quarter we saw an improvement in our key trading metrics. Both volume and transactions grew as the decline in average basket spend in supermarkets continued to stabilise," chief executive Mike Coupe said.
"Whilst the market is clearly still challenging, with food deflation impacting many categories, we are making good progresson delivering our strategy," he added.
The grocer said today it now expected its 2015-16 underlying profit before tax to be moderately ahead of the published consensus of £548m if current market trends continue. That would be down from £681m made in the 2014-15 year.
However, its sales at stores open over a year still fell 1.1%, excluding fuel, in its seventh quarterly decline in a row, hurt by fierce competition with rivals that has contributed to ongoing price deflation.
The figures compared with analysts' average forecast of a decline of 1.3% and a fall of 2.1% in the previous quarter.
Sainsbury's, in common with its major rivals, is battling to stem the flow of shoppers to the discounters through price cuts and improvements to product quality and service, financed by cost savings and dividend reductions.
Earlier this month Morrisons posted a 2.4% fall in second quarter like-for-like sales, while in August Asda reported a 4.7% slump in underlying sales for its first quarter.
Tesco will update on its second quarter on October 7.