Sainsbury’s had a good Christmas, with like-for-like sales up 5.9% in Q3, nearly 7% up for the six weeks to Christmas Day, leading the company to be bullish about its full year to March results despite tough economic conditions.
The conpany’s Argos arm, however, didn’t fare so well, seeing sales in Q3 rise year-on-year, but still coming in some 5% below where they were pre-pandemic.
General Merchandise growth was also stronger than expected, reflecting market share gains, says the company, as customers trusted Sainsbury’s and Argos for value and the speed and certainty of Argos Fast Track delivery and Click & Collect.
Additionally, the retailer has shaved £15m from its finance costs, broadly offset by the cost of a significant colleague pay increase ahead of the year end annual pay review. As a result, Sainsbury’s says that it remains cautious on the consumer backdrop and now expects underlying profit before tax for the year to March 2023 to be towards the upper end of the guidance range of £630m to £690m. It additionally expects to generate retail free cashflow of around £600m, ahead of previous guidance of at least £500m.
The Q3 period saw shopper habits change, the retailer reveals, with Simon Roberts, Chief Executive, saying that: “Millions of households managed their budgets differently, hosting larger gatherings again and treating themselves at home. Customers shopped early, buying Christmas treats and fizz more than once and looked for deals, taking advantage of Black Friday and other seasonal offers. Argos offered great value and quality and, as train and postal strikes disrupted the country, customers appreciated its reliability and convenience”.
Sales of technology products were particularly strong, driven by improved availability and promotional activity in the run up to the Football World Cup. Household categories performed well as customers bought energy saving items such as air fryers and heated laundry airers and Habitat branded products outperformed in home and furniture.
The seller also benefitted from starting its Black Friday awareness campaign earlier this year and delivered sales ahead of last year, with more than 120m visits to the Argos website over the campaign period16 and 15,000 orders processed per hour on Black Friday itself.
Cold weather towards the end of the quarter also drove an uplift in sales for Tu Clothing, with knitwear and Christmas pyjamas particularly popular with customer.
Commenting on the results, Josh Warner, analyst at City Index says: “The company continues to raise prices as slow as possible to help customers weather the cost-of-living crisis with its £550m investment in keeping them low through to the end of March 2023, and said it has extended its Aldi Price Match and expanded the number of goods covered by the scheme in January after conceding that money will be exceptionally tight for consumers this year.
“Meanwhile, Argos delivered a strong performance as Black Friday attracted shoppers looking for a bargain, the World Cup boosted sales of tech, and Christmas drew in shoppers looking for gifts – but sales remained below what we saw three years ago.”
Attention now turns to its larger rival Tesco, which is due to report its own sales figures tomorrow. Analysts believe retail like-for-like sales will come in at 4.1% in the third quarter, led by an 8.3% rise in sales from wholesaler Booker, a 4.2% rise from its UK and Republic of Ireland operations and a milder 3% uptick in Central Europe. Its outlook will also be under the radar, with Tesco aiming to deliver a retail adjusted operating profit of £2.4bn to £2.5bn over the full year and retail free cashflow of at least £1.8bn.