Sainsbury’s ups guidance but warns on market conditions

Grocery sales grow but chain hit by weaker figures from Argos

Sainsbury’s upgraded its full-year profit forecast yesterday but warned of a challenging market amid weaker sales at Argos.

The supermarket giant revealed a 1.1% rise in like-for-like sales over the 15 weeks to January 6, helped by solid trade over the Christmas week. Total revenue rose 1.2% in the period, with grocery sales growing 2.3%. However, sales at its general merchandise arm, which includes Argos, fell 1.4%.

“We have to be cautious because that’s a reflection of the consumer environment,” chief executive Mike Coupe said.

“We live in uncertain times and we will adapt our business accordingly.”

Nevertheless, Sainsbury’s said it expects underlying profit to be “moderately ahead” of the £559 million consensus after signalling an extra £20m of cost savings from the integration of Argos, which it acquired in 2016.

Shares nudged up in early trading and closed 5.5p up at 253.9p.

Laith Khalaf, senior analyst Hargreaves Lansdown, said: “Sainsbury’s put in a solid performance in the last quarter of the year, despite its exposure to the fast-shrinking general merchandise market.

“Consumers are spending less on discretionary items thanks to stagnant wages and rising inflation.”

Over the Christmas week, Sainsbury’s recorded record sales, booked over 340,000 online grocery orders and saw “stellar growth” in its Argos Fast Track delivery and collection.

Online sales accounted for 20% of the group’s sales during the quarter.

Mr Coupe is overseeing the rapid expansion of Argos stores within Sainsbury’s supermarkets, and the group now has 164, including its Dundee outlet.

“Argos stores in Sainsbury’s supermarkets performed particularly well and Argos saw record sales across the Black Friday period,” he said.

Supermarkets are battling rising costs linked to the Brexit-hit pound, falling consumer confidence and fierce competition in the sector as Lidl and Aldi continue their march.