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Sainsbury's defies doomsters as Christmas shopping starts early

By James Davey

LONDON (Reuters) - Cash-strapped Britons are stocking up on Christmas treats earlier than usual and planning to eat more at home, helping Sainsbury's to defy expectations of a profit downgrade.

Shares in Britain's second largest supermarket group were up 5% on Thursday morning after it beat first-half results estimates and stuck to its full-year outlook, despite expectations it might follow bigger rival Tesco and trim its profit forecast.

"One of the key things that we're clearly seeing is customers wanting to spread out the cost of Christmas, shopping earlier where they can, buying little and often as they plan for Christmas," CEO Simon Roberts told reporters.

He said Britons were also moving much more towards eating at home rather than at restaurants - bad news for the country's beleaguered hospitality sector - and highlighted a marked shift towards demand for own brand food products, which are generally cheaper than branded products but more profitable for grocers.

Roberts said Sainsbury's was seeing fewer defections to discounters Aldi and Lidl than its main rivals, while its basket sizes were holding up ahead of competitors.

With inflation at a 40-year high of 10.1%, food inflation at 14.5% and consumer confidence close to the gloomiest on record, Britons have cut their spending.

But Sainsbury's, which has a 14.7% share of Britain's grocery market, said trading had remained strong in the first few weeks of its second half, which started Sept. 18, and it had continued to make market share gains on a volume basis.

It said that reflected investments made in its offering, with customer perception of its value and quality improving.

Sainsbury's still expects 2022-23 underlying pretax profit of between 630 million and 690 million pounds ($718-$786 million), down from the 730 million pounds it made in 2021-22. Prior to Thursday's update analysts were on average forecasting 637 million pounds.

The company made an underlying pretax profit of 340 million pounds for the 28 weeks to Sept. 17, an 8% fall.

Second-quarter like-for-like sales, excluding fuel, rose 3.7%, following a 4% fall in the first quarter.

Market leader Tesco lowered its profit expectations last month, while in September, Morrisons, the Co-operative and Aldi UK all reported profit falls.

Analysts see Sainsbury's, whose shares are down 24% this year, as more challenged than other supermarket groups because it owns the Argos general merchandise business - an area more exposed to pressure on consumers' disposable income.

Roberts said the impact of the crisis on general merchandise sales would be clearer in a few weeks time.

"That's the big unknown," he said.

(Reporting by James Davey; Editing by Jason Neely and Mark Potter)