Sainsbury's reveals a strong first quarter with rising sales

 
Courtney Goldsmith
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Sainsbury's had a strong first quarter (Source: Getty)

Sainsbury's has unveiled strong growth in retail sales in the first quarter, beating expectations.

In a trading update for the 16 weeks to 1 July, the supermarket giant said like-for-like retail sales increased 2.3 per cent, including Argos for the first time and excluding fuel.

Shares in the company rose 1.61 per cent to 253.05p in morning trading.

Total retail sales were up 2.7 per cent while clothing and general merchandise, which both outperformed the market, increased 7.2 per cent and one per cent, respectively. Grocery sales lifted three per cent.

"We have delivered a strong performance, driven by our differentiated strategy, offering customers quality, value and choice across food, general merchandise, clothing and financial services," said chief executive Mike Coupe.

"The market is competitive and we continue to manage cost price pressures closely. Our strategy is delivering and we are well placed to navigate the external environment."

The UK's second-biggest supermarket group, which bought Home Retailer, the owner of Argos, last year, said it remains confident of delivering £160m of core earnings synergies from the acquisition by March 2019.

Laith Khalaf, senior analyst at Hargreaves Lansdown said the recent heatwave and rising food costs helped the retailer.

"The bigger picture is still a challenging one for the UK supermarkets. Weaker sterling is pushing up food prices and putting a dent in consumers’ purses, while the trading environment remains as competitive as ever," Khalaf said.

Sainsbury's is also nearing a £130m deal to acquire local supermarket chain Nisa, although earlier this week it was revealed convenience chain McColl's has also held meetings with the retailer.

"While all this recovery, refocusing and reinvention goes on, investors have to accept there’s still a lot of uncertainty in the UK supermarket sector," Khalaf said.

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