Sainsbury’s reported retail sales excluding fuel fell in the last quarter and said it faced an “uncertain” impact from rising costs and warned the market environment remains competitive.
Shares in Sainsbury's dipped as markets opened to lows of 263p, but recovered some of their gains to a loss of around one per cent at the time of publication.
Combined like-for-like sales for Sainsbury’s and Argos rose 0.3 per cent, excluding fuel.
However, total Sainsbury’s sales edged up 0.1 per cent and like-for-like retail sales fell 0.5 per cent, again excluding fuel which has been bolstered by rising oil prices.
The purchase of Argos continues to flatter the figures, however, with total sales up 3.8 per cent and like-for-like performance even stronger, at 4.3 per cent.
The chief executive welcomed “good growth” from Sainsbury’s Bank, with personal loan sales performing “well”.
Why it’s interesting
Grocers are on the front line of price pressures from the fall in the pound after the EU referendum, with a large proportion of imported goods and direct exposure to the spending habits of consumers.
With inflation rising fast consumers are expected to rein in their spending, which could raise the pressure on supermarkets in what is already a fiercely competitive environment.
However, the purchase of Argos has repeated its trick from January of boosting the overall group. The catalogue retailer found itself ideally placed for the online “click and collect” model.
What Sainsbury’s said
Mike Coupe, Sainsbury’s group chief executive, said: "We are pleased with this performance and are making good progress against our key priorities. Customers appreciate the quality, choice and value of our differentiated food offer and our Tu clothing brand again performed ahead of the market, with sales up five per cent.
"Argos delivered another strong quarter of growth, with like-for-like sales up by over four per cent. We are investing in digital to deliver excellent service and availability, with enhancements to the Argos website and app. Online participation is growing, driven by mobile and Fast Track delivery and customers are responding well to new ranges.
The market remains very competitive and the impact of cost price pressures remains uncertain. However, we are well placed to navigate the external environment and remain focused on delivering our strategy.
The Argos partnership seems to have clicked, but Sainsbury’s will have to collect stronger sales growth in its core business to continue to placate investors.