By Scott Wright
THE boss of J Sainsbury has hailed a “standout” operations performance as the supermarket turned in a mixed set of results for the key Christmas period.
Shares in the grocery giant closed lower after it reported a 0.7 per cent dip in like-for-like sales for the 15 weeks to January 4, excluding fuel.
Strong growth in online and clothing sales, the latter driven up 4.4% thanks to colder weather and the popularity of its festive party range, was offset by a steep fall in sales of general merchandise, which dropped 3.9%.
Grocery sales grew by 0.4%, outpaced by grocery sales online, which grew by 7.3% on the back of record order numbers.
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The update came a day after retail analyst Kantar had reported that Sainsbury’s had held its grocery market share at 16% in the 12 weeks to December 29.
Kantar said sales at the retailer were down 0.7% over the period as it declared growth for the supermarkets had been its slowest at Christmas since 2015.
Sainsbury’s chief executive Mike Coupe said the group’s digital investment was “paying off”, with total online sales increasing by 5% over the period. Argos had its “biggest digital Black Friday” to date, he said, driven by record mobile and click and collect sales.
Close to 32 million customers shopped in Sainsbury’s and Argos in the “key Christmas week”, he added.
Mr Coupe said: “The colder weather helped to deliver strong clothing sales in the quarter and our Christmas, party and gifting ranges were all popular with customers. Argos outperformed the market in consumer electronics, but the toy and gaming markets declined year on year.”
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Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said there were “two faces” to the third quarter for Sainsbury’s. While she said the group delivered a “sturdy performance” in a “really tough environment” for groceries, its showing in general merchandise “doesn’t look so slick”.
Ms Lund-Yates said: “Shrinking of general merchandise sales was driven by a weak market in gaming and toys, while electronics fared better.
“This will be one to watch because Argos is more vulnerable to shifts in discretionary spending than food. Since the definitive election result purse strings could start to loosen, but for now this division hasn’t benefitted from any so-called Boris bounce.”
She added: “Sainsbury’s is doing what it can in difficult conditions, but that doesn’t mean it can take its foot off the gas. We’re yet to hear from the remaining food retailers so we’ll be waiting to see how Sainsbury’s performance stacks up against all its rivals.”
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Mr Coupe said: “We gave our customers a great combination of quality food at good prices this Christmas and we delivered a standout performance operationally. We have a real sense of momentum in Sainsbury’s and investment in our stores and improvements to service and availability have led to our highest customer satisfaction scores of the year.”
He added: “Our digital investments are also paying off and more than 20% of our business was online in the quarter.
“Groceries online had record order numbers throughout the Christmas period and customers are increasingly choosing to shop with SmartShop in our supermarkets.”
On Tuesday, Morrisons reported a 1.7% fall in like for like sales for the 22 weeks ended January 5, with the drop less steep than observers had expected. Morrisons’ chief executive, David Potts, said the Bradford-based chain’s profitability was “robust” amid an “unusually challenging period for sales”.
Kantar said on Tuesday that Lidl was the big festive winner among the UK’s major supermarkets, having grown sale by 10.3%. It was followed by fellow discounter Aldi, which grew sales by 5.9%.
Tesco and Marks & Spencer report their festive results to the City today, with analysts expecting a strong showing by Tesco.
Mulling the outlook, Sainsbury’s warned retail markets “remain highly competitive and promotional and the consumer outlook continues to be uncertain. However, we are well placed to navigate the external environment and are executing well against our strategy,” it added.
Shares in Sainsbury’s closed down 3.8p, or 1.65%, at 227.2p.
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