Sainsbury - Record sales, but challenges remain

Sainsbury's raises profit forecast after enjoying record Christmas

Sainsbury's has raised its forecasts for full-year profits after a record Christmas trading performance partly driven by a surge in online sales.

With Britons under pressure from slow wage growth compounded by higher inflation, company updates and survey data this month show they cut back on nearly everything other than food purchases in the run-up to Christmas.

The supermarket group, which also owns Argos, was lifted by growth in grocery and clothing sales though general merchandise revenues were down for the 15 weeks to 6 January, in what was described as a "challenging" market.

As a result of the robust performance over the festive period, Sainsbury's said that it now anticipates underlying profit for the full financial year to be "moderately ahead of published consensus", which is £559m.

Sainsbury's, which extended its product range when it bought toys and electricals retailer Argos for 1.1 billion pounds ($1.5 billion) in 2016, indicated that trend would continue this year.

"We are actually over-delivering against the synergies that we promised the markets when we actually acquired the Argos business", Coupe told CNBC. Sainsbury's opened 52 Argos stores inside supermarkets during the period, bringing the current total to 164. The retailer also said that its General Merchandise and Clothing businesses "outperformed the market in challenging conditions".

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Third quarter like-for-like (LFL) sales excluding fuel rose 1.1%, an improvement on the 0.6% seen in Q2.

Mr Coupe said the company was pleased with the performance, adding it saw a boost from both its premium lines and cut-price offers.

Overall, grocery sales grew 2.3 per cent, while online grocery sales surged 8.2 per cent and convenience sales posted a 7.3 per cent gain.

Separate industry data from Kantar Worldpanel showed shoppers spent £1bn more on grocery shopping in the last three months of 2017 compared to the year before - with Tesco seeing the best growth among the major supermarkets.

On Wednesday discounter Lidl UK said its total sales grew 16 percent in the Christmas period. We had a strong Christmas week, with record sales, over 340,000 online grocery orders and stellar growth in Argos Fast Track delivery and collection.

Boss Mike Coupe told media the group was pleased with the performance and how online sales and premium food ranges helped boost growth: "Customers bought more Taste the Difference food than past year as people treated themselves and our popular 25p veg lines helped our customers live well for less".

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