Sainsbury’s shares surged this morning on news of sales growth over Christmas – here’s how retail experts reacted
Sainsbury's shares have surged by six per cent this morning after it reported a record Christmas week for trading.
The supermarket said like-for-like retail sales went up 0.1 per cent in the third quarter, and while this might not be as impressive as Morrisons' 2.9 per cent growth, reported yesterday, investors were still cheered by the update.
Similarly, retail analysts and market commentators found reason to be cheerful among today's figures – but the supermarket didn't gather universal praise.
Steading the ship
"Not even jealousy at the strong results posted by its rival Morrisons will take the shine off Sainsbury’s surprisingly decent Christmas performance," said Retail Vision's John Ibbotson.
"After a mostly miserable 2016, the struggling brand’s sighs of relief are audible."
However, he added that "talk of a turnaround is a touch premature".
"Like-for-like sales barely crept up and like-for-like volumes haven’t budged," Ibbotson said.
So far, it’s a case of Sainsbury’s steadying the ship rather than plain sailing.
Argos to the rescue
Laith Khalaf, senior analyst at Hargreaves Lansdown, said Sainsbury's had been "pulled up by its bootstraps" by the performance at Argos, which the supermarket bought last year.
"The supermarket business failed to generate any sales growth on its own," he said.
"However against a backdrop of food deflation, flat sales are a pyrrhic victory for the supermarket, and represent an improvement on performance so far this financial year.
"Sainsbury has taken a bit of a different tack to its rivals, and has chosen to use its excess space to host concessions rather than closing stores. To that end the Argos acquisition seems to be bedding in nicely so far, though it is still early days."
All but flat
"Sainsbury’s all but flat Christmas is only overshadowed by what is expected from Asda. ‘Not as bad as it could have been’ is not a strong position to be in," said Phil Dorrell, partner at Retail Remedy.
"Sainsburys may now be regretting their decision to virtually eliminate multibuy promotions, proving too aggressive on the sales line at this high-volume and highly competitive time of year. While David Potts this week celebrates finding Morrison’s mojo, Mike Coupe is left wondering if Sainsbury’s mojo was left behind with the promotional calendar."
Dorrell also noted that Argos had played a large part in bolstering Sainsbury's results.
"The market was expecting a sign that the Argos acquisition was sound and a strong Christmas period suggests it is," he said.
"It is too soon to say whether it delivers within a Sainsburys supermarket but that’s not to say it was the wrong decision. We believe it is strategically aligned with the need to drive non-food and fill space in Sainsbury’s large format stores.
"Argos delivered a good quarter, under competitive pressure, certainly, under significant organisational complexity, definitely. It was always challenging to incorporate Argos into stores in the golden quarter but the opportunity rightly outweighed the risk."