Sainsbury’s warns of challenging market ahead as fall in sales at Argos dampens down performance

Sales at established stores rose by 1.1% in the three months to 6 January and total sales were up by 1.2%. The company said grocery sales increased by 2.3%, slightly behind the pace of food price inflation, but ahead of its 1.4% growth in the previous quarter.

General merchandise sales fell by 1.4%, but Britain’s second-largest supermarket chain said profits would be moderately ahead of the expectated £559m because it had found more ways to save money by merging its supermarkets with Argos.

Sainsbury’s subdued trading figures came as Lidl said it had increased sales by 16% year on year in December. The German discounter said sales of turkeys had risen by 10% and luxury Christmas puddings by 60%.

Christian Härtnagel, the chief executive of Lidl UK, said: “Lidl UK has had a fantastic 2017 and this was capped by our strongest Christmas trading period to date.”

The relative performances highlight the scale of the challenge for traditional supermarkets, which all lost market share over Christmas while Lidl and Aldi increased theirs. Both discounters are rapidly opening stores as shoppers look for ways to save money at a time when inflation is outstripping pay rises.

Mike Coupe, the Sainsbury’s chief executive, said: “We delivered an excellent operational performance across the group, with great availability, strong customer satisfaction scores and our lowest level of waste ever at Christmas.”

He said customers bought more products from Sainsbury’s premium Taste the Difference range and snapped up bags of 25p vegetables before Christmas.

Although sales fell at Argos and clothing sales rose by 1%, compared with 6% in the previous quarter, Coupe said the chain had taken market share.

“General merchandise and clothing grew market share in a challenging market. Argos stores in Sainsbury’s supermarkets performed particularly well and Argos saw record sales across the Black Friday period,” he said.