Sainsbury’s has claimed it is winning the grocery store wars after achieving further growth in food sales but seen its shares fall amid concerns about the performance of the Argos non-food business.

The supermarket giant said it achieved the biggest market share gains of any grocer during the latest quarter as it felt the benefit of moves to match discounters on prices and to increase customer loyalty while expanding its ranges.

The group has around 100 stores in Scotland out of a total of 1,400 across the UK.

In an update on trading in the 16 weeks to June 22, the group said volume growth had remained strong during a period in which the fall in the inflation rate helped boost consumer spending power and to offset the impact of unfavourable weather conditions.

The fall in the annual consumer price inflation rate to 2% in May from 8.7% in the preceding 12 months has provided a fillip for the wider retail sector.

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However, chief executive Simon Roberts said Sainsbury’s has been winning share from competitors for 15 months, with more people choosing its stores for their big weekly shop.

He underlined the importance of the schemes under which Sainsbury’s matches the prices of more than 650 products with those charged by Aldi and offers benefits for customers that register for its Nectar scheme.

Mr Roberts said Sainsbury’s had also performed well in the premium end of the grocery market helped by the introduction of 400 new summer products, almost half of which are under its Taste the Difference brand.

With Sainsbury’s achieving a 4.8% year-on-year increase in grocery sales in the period covered by the update analysts said the group had performed well, although the growth rate slowed from 7.3% in the preceding quarter.

Shore Capital said Sainsbury’s had made excellent progress in the grocery market, with the investment group’s Clive Black declaring: “There remains a lot to like about Sainsbury in an improved UK supermarket scene.”

Chris Beckett, head of equity research at wealth manager Quilter Cheviot, said Sainsbury’s continued to build momentum in the competitive grocery market.

However, he added: “The overall thesis remains that in food retail, the bigger businesses are generally better positioned to reap the benefits due to economies of scale, hence we prefer Tesco.”

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Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said Sainsbury’s performance in the food market was not strong enough to allow investors to disregard the problems the group is facing with the Argos operation it bought in 2016.

Sainsbury’s has done just about all it can to better itself and it should be commended for that, but the Argos albatross around its neck can’t be ignored,” said Ms Lund-Yates.

Argos sales fell by 7.7% in the latest quarter. They have fallen for four quarters running.

Sainsbury’s noted: “Argos sales declined against a tough comparative, reflecting an unseasonal start to Summer, impacting seasonal categories like House and Garden and Outdoor Furniture. Weaker Consumer Electronics sales were driven by softer demand, particularly in Gaming.”

The group insisted it is making progress with efforts to reshape the core Argos proposition.

Sainsbury’s said it expects to unlock a further £1 billion of operating cost savings over the next three years helped by the use of Artificial Intelligence to improve efficiency.

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The group expects to achieve an underling retail operating profit of £1.01bn to £1.06bn in the current year, up between 5% and 10% on the 2023/24 financial year.

The group reiterated plans to return at least £250m to shareholders following completion of the deal to sell its core banking business to Royal Bank of Scotland owner NatWest, which was announced last month. Sainsbury’s will retain its insurance and travel money businesses.

Shares in the J Sainsbury group closed down 3%, 7.4p, at 250.4p.