Sainsbury's profits boosted by 'record' Christmas trading

Sainsbury's warns of challenging market as Argos sales slide

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"We think it's a good performance in what of course continues to be a challenging market", Mike Coupe, chief executive officer of Sainsbury's, told CNBC Wednesday.

Meanwhile, general merchandise sales slipped 1.4% in the period, while total retail sales were up 1.2%, excluding fuel, and like-for-like sales up 1.1%, also excluding fuel.

Over the Christmas week, Sainsbury's recorded record sales, booked more than 340,000 online grocery orders and saw "stellar growth" in its Argos Fast Track delivery and collection. He added: "Following the acquisition of Home Retail Group, the combination of Sainsbury's and Argos has proved greater than the sum of its parts, and as a result the supermarket group is lifting profit forecasts for the year".

It also said that it now expects to achieve earnings before interest, tax, depreciation and amortization synergies from its Argos acquisition of between GBP80 million and GBP85 million.

Looking ahead, the group remains cautious about the consumer environment in the coming year, noting it expects market conditions to "remain challenging" and, as a effect, expects 2017/18 underlying profit to be moderately ahead of published consensus. Overall the group expects to deliver £185m of cost savings this year and are ahead of its three year target.

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Sainsbury's opened 52 Argos stores in Sainsbury's supermarkets during the quarter, bringing the total to 164 - and plans to open around 145 Argos stores in Sainsbury's supermarkets in the 2017/18 financial year. Of these, 18 replaced an existing Argos store. Total Grocery sales growth was 2.3%, boosted by the Online (+8.2%) and Convenience (+7.3%) channels.

Sainsbury's subdued trading figures came as Lidl said it had increased sales by 16% year on year in December.

'We also helped our customers to live well for less this Christmas, offering key Christmas vegetable lines for 25p and some of the lowest turkey prices in the market, ' the retailer said. The group claimed the week before Christmas was its strongest yet, but did not provide a breakdown of like-for-like sales.

General merchandise and clothing had both increased their share "in a challenging market".

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