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Sainsbury's enjoys Christmas sales boost but warns over challenging market

Strong Christmas drives optimism at Sainsbury's Sainsbury's raises profit forecast after enjoying record Christmas
Nellie Chapman | 10 January, 2018, 16:09

Britons are facing pressure from slow wage growth and the jump in inflation that followed the 2016 Brexit vote.

Sainsbury's has raised its forecasts for full-year profits after a record Christmas trading performance partly driven by a surge in online sales.

Sainsbury's now has a 16.2 per cent share of the overall United Kingdom grocery market, according to analytics firm Kantar Worldpanel, behind Tesco but ahead of Asda and Morrisons.

"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.

Sainsbury's, the UK's second biggest supermarket group, said its general merchandise sales fell 1.4 percent in the 15 weeks to January 6, its fiscal third quarter, having fallen 1.6 percent in the previous quarter.

Total grocery sales growth was ahead of that of Q2 (1.4%), however marginally behind that of Q1 (3.0%).

He said United Kingdom consumers tightening their belts could in fact benefit Sainsbury's food business since "people eat out less and tend to eat in". Analysts had forecast a 0.9 percent increase, according to Reuters.

Its shares, down 3 percent over the past year, were up 1.4 percent at 1120 GMT. Online accounted for 20 percent of the group's sales during the quarter.

Its food sales rose by 2.3 per cent during the period but its general merchandise...

In addition, it undertook 34 range reviews during the quarter, covering around 13% of its grocery sales.

Morrisons reported strong figures on Tuesday and Tesco will update the market on festive trading on Thursday.

The second largest United Kingdom grocer reported an increase in like-for-like sales of 1.1 percent during its third quarter, which includes the Christmas period.

The retailer's full-year underlying profit before tax is now expected to be "moderately ahead of the published consensus" of £559 million, published on 5 January.

They said this mainly because of an extra £20 million in cost savings, or "synergies", from its integration and expansion of Argos - which it acquired in late 2016 - within Sainsbury's supermarkets.

"The improved profit outlook is essentially through bringing forward synergies (of which the ultimate total has not changed) - rather than the company's own underlying expectations having changed materially", said analysts at Barclays.