Sainsbury's sales flat amid 'very competitive' market - but Lidl has record Christmas

Sainsbury's said like-for-like sales edged just 0.1 per cent higher over its Christmas quarter

SAINSBURY'S has said like-for-like sales edged 0.1 per cent higher over its Christmas quarter, but warned the market remains "very competitive" and the impact of the pound on prices was "uncertain".

The UK's second biggest supermarket chain said it delivered a "good" Christmas performance in the 15 weeks to January 7, while robust Black Friday trading helped its recent Argos acquisition notch up a 4 per cent hike in like-for-like sales.

It came as budget supermarket Lidl notched up record sales over the Christmas period after a surge in lobster sales. The German chain said sales increased 10 per cent over December, its best festive sales performance.

Mike Coupe, group chief executive at Sainsbury's, said: "The market remains very competitive and the impact of the devaluation of sterling remains uncertain.

"However, we are well placed to navigate the external environment and remain focused on delivering our strategy."

The Sainsbury's performance sees the chain left in the shade by smaller rival Morrisons, which hailed its best Christmas for seven years on Tuesday after sales surged by 2.9 per cent over the nine weeks to January 1.

But for Sainsbury's, it marked its first like-for-like growth in a year and comes as retail experts said the entire sector enjoyed a solid Christmas.

Mr Coupe said the supermarket had record trading during the Christmas week, with more than 30 million customer transactions and over £1 billion of sales across the group.

Combined sales across both the supermarket and Argos were 1 per cent higher excluding fuel.

Mr Coupe said the Argos sales growth and trading boost seen in combined superstores "reinforced the case" for the acquisition.

Sainsbury's snapped up Argos owner Home Retail Group last year in a £1.4 million deal.

The group said it shifted 500,000 parcels since September and 55,000 in the Christmas week alone as it increased Argos orders online.

Sainsbury's shares jumped 5 per cent after the update, while the sector's festive trading cheer also saw further gains for rivals Morrisons and Tesco, which reveals its Christmas trading on Thursday.

In a further sign of food price hikes on the horizon, Sainsbury's said deflation in its grocery arm eased back to 0.5 per cent in its third quarter against 1 per cent the previous three months.

Data from Kantar Worldpanel on Tuesday revealed the first food price inflation in more than two years across the sector over the Christmas quarter, while Mr Kipling cakes firm Premier Foods confirmed it was in talks with retailers over "mid-single digit" price rises.

Mr Coupe declined to comment on "specific supplier negotiations", but said "clearly we have a job to do in mitigating price pressures".

Laith Khalaf, senior analyst at Hargreaves Lansdown, said the Argos business "came to the rescue" and helped offset a lacklustre performance from the supermarket arm.

He said: "Argos pulled Sainsbury's up by its bootstraps over the Christmas trading period, as the supermarket business failed to generate any sales growth on its own."

Sainsbury's said the online grocery arm saw sales lift 9 per cent, while its Tu clothing range delivered a 10 per cent sales hike in what the group described as a "very challenging" market.

Best-sellers across Argos included the iPad Mini, PlayStation 4 computer games consoles and Fitbits.

Meanwhile Lidl did not disclose like-for-like sales for the period, a more widely used industry measure of performance.

The chain said customers lapped up festive favourites, helping sales of carrots, parsnips, sprouts and potatoes rise 60 per cent.

A Twitter campaign saw the price of the supermarket's luxury lobster drop to £2.99, resulting in 40,000 sales in one day. Turkey sales increased by 40 per cent following an advertising campaign.

Boss Christian Hartnagel said: "It's incredibly encouraging that, during this highly competitive time, we have achieved our most successful festive trading period ever.

"We are unwaveringly committed to helping customers save as much money as possible

"We also remain fully committed to our ongoing expansion plans, which will see the opening of up to 50 new stores next year, along with two new regional distribution centres, creating thousands of new jobs up and down the country."

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