Sainsbury’s posts jump in festive grocery sales as customers traded up
Sainsbury’s has delivered an increase in festive grocery sales as customers traded up to its premium own-brand range but also revealed ongoing pressure in its non-food arm and Argos business.
The UK’s second largest supermarket chain behind Tesco posted a 5.1 per cent rise in total grocery sales over the six weeks to January 3, helped by strong demand for its Taste the Difference products.
But Argos sales fell 2.2 per cent in the period and Sainsbury’s non-food and clothing sales were 1 per cent lower.
In its third quarter overall, Sainsbury’s said like-for-like sales excluding fuel lifted 3.4 per cent in the 16 weeks to January 3, which marked a slowdown on the 4.3 per cent notched up in the previous three months.
Despite tougher general merchandise trading, the group said it remained on track with recently upgraded retail earnings guidance of more than £1 billion for the full year.
Chief executive Simon Roberts said the firm had “won grocery market share for the sixth consecutive Christmas” thanks to investment in boosting its offer during a highly competitive festive season.
Mr Roberts said: “When we strengthened our profit guidance in November, we said we planned to invest in the strength of our competitive position through the most important trading period of the year.
“We expected the market to become more competitive with customers spending more carefully and we invested in balanced choices to offer great value for money, outstanding quality and innovation and leading customer service and availability, both in store and online.”
The figures follow Tesco’s festive update on Thursday, which showed a 3.3 per cent rise in like-for-like UK and Ireland sales over the six weeks to January 3, which was lower than forecast.
Shares in Sainsbury’s fell 4 per cent in early trading on Friday as its third quarter growth also came in lower than expected in the market.
Tesco’s chief executive Ken Murphy said on Thursday competition in the market was “intense” and “relentless” over the festive season, with shoppers increasingly seeking out value.
German-owned discounters Aldi and Lidl reported total sales up 3.4 per cent and 10 per cent in the final four weeks leading up to Christmas Day as consumers looked to save money on their festive shop.
But Sainsbury’s said shoppers were also trading-up over Christmas, with sales of its Taste the Difference range jumping 15 per cent in the Christmas quarter.
Fresh food sales also lifted 8 per cent during the quarter.
Richard Hunter, Head of Markets at interactive investor, commented: “Sainsbury spent considerable time and thought planning for its important Christmas period and its efforts were largely rewarded with a strong showing, even though its General Merchandise and Argos units made for less pleasant reading.”
He continued: “Argos remains a work in progress after some years in the doldrums on reduced discretionary spend. Sales fell by 2.2 per cent over Christmas and by 1 per cent over the quarter, which is a further disappointment particularly given the Black Friday and festive opportunities.”
"Sainsbury attributed the weakness to a number of factors, including a tough promotional market resulting in lower prices, a weak gaming market and subdued consumer confidence.”