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Sainsbury’s surprises with record sales in Christmas week Sainsbury’s surprises with record sales in Christmas week
(about 1 hour later)
Sainsbury’s has surprised the City with a record Christmas week and a modest rise in sales in the third quarter overall. A better than expected Christmas at Sainsbury’s has reinforced the logic of its £1.4bn takeover of of Argos, according to the supermarket’s boss.
Sainsbury’s shares rose more than 6% as it surprised the City with a record Christmas week and its first sales growth since March last year.
Like-for-like sales excluding fuel, stripping out those at stores open for less than a year, rose by 0.1% in the 15 weeks to 7 January, beating expectations of a 0.8% drop.Like-for-like sales excluding fuel, stripping out those at stores open for less than a year, rose by 0.1% in the 15 weeks to 7 January, beating expectations of a 0.8% drop.
Britain’s second largest supermarket said online groceries, sales at its Sainsbury’s Local convenience stores, clothing and general merchandise were all strong performers in the third quarter. Sainsbury’s said the volume of groceries sold remained steady as it slashed the number of multibuy offers in stores and price deflation slowed to 0.5% in the quarter compared to a 1% fall in the previous six months.
The Sainsbury’s chief executive, Mike Coupe, said: “Sainsbury’s offered customers greater quality food, choice and value than ever before, across all channels. We had a record Christmas week, with more than 30m customer transactions at Sainsbury’s and over £1bn of sales across the group.” Britain’s second largest supermarket chain said online groceries, convenience stores, clothing and other non-food all performed strongly in the third quarter. Food and grocery sales in established supermarkets fell for the group as a whole, but rose by between 1% and 2% in those containing Argos outlets.
Like-for-like sales at Argos, bought for £1.4bn by Sainsbury’s in 2016, rose by 4%, driven by its Black Friday offers and the key Christmas trading period. Mike Coupe, Sainsbury’s chief executive, said: “We continue to see the grocery supermarket business being challenging but we know that we have some solutions to that not least when we put in an Argos store grocery sales go up. We believe we now have our destiny in our own hands.”
Coupe sounded a note of caution about the months ahead, partly because of the sharp drop in the value of the pound since the Brexit vote in June. A weaker pound makes products imported from abroad more expensive. Sainsbury’s sales growth was lower than the 2.9% reported by Morrisons, which enjoyed its best Christmas in seven years.
Discounter Lidl also revealed a 10% rise in sales in December as it said as turkey sales rose by 40% and seasonal vegetables by 60%.
Christian Härtnagel, the new chief executive of Lidl UK, said: “Customers were once again won over by the quality and freshness of our fruit and vegetables.”
Coupe said Sainsbury’s had achieved a “very creditable performance in a very challenging period of time.”
“We haven’t been through some of the trevails and traumas some of our competitors have been through,” he said. “We’ve had a pretty consistent performance over the last five years and these numbers give us and the outside world confidence that we are putting the building blocks in place for he future. We have the right strategy.”
Like-for-like sales at Argos, bought for £1.4bn by Sainsbury’s in 2016, rose by 4%, more than double the rate expected by the City, driven by its Black Friday offers and the key Christmas trading period. Toys and technology including Fitbits, mobile phones and computers all sold well.
Sainsbury’s sales growth was boosted by a 10% rise in clothing sales, 9% growth online and a 6% rise in sales at its convenience stores. While food sales slipped back, Coupe insisted that Sainsbury’s had not become distracted by the Argos acquisition and expansion of its bank and non-food business.
He said Sainsbury’s had seen growth in areas where it had invested in price and quality such as its premium Taste the Difference party food up by 50% and Free From, specialist allergy-friendly foods, up 8%.
But Coupe sounded a note of caution about the months ahead, partly because of the sharp drop in the value of the pound since the Brexit vote in June. A weaker pound makes products imported from abroad more expensive.
He said: “The market remains very competitive and the impact of the devaluation of sterling remains uncertain. However, we are well placed to navigate the external environment and remain focused on delivering our strategy.”He said: “The market remains very competitive and the impact of the devaluation of sterling remains uncertain. However, we are well placed to navigate the external environment and remain focused on delivering our strategy.”
Sainsbury’s was the second of the “big four” supermarkets to update the market on the key Christmas trading period. On Tuesday, Morrisons reported its best Christmas in seven years, with sales excluding food up by 2.9% in the nine weeks to 1 January.