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Sainsbury's defies gloomy forecasts with strong Christmas trade

By Holly Williams

Sainsbury's has shrugged off a "very competitive" market to see festive sales edge higher in the latest sign that supermarkets enjoyed a better-than-expected Christmas.

The UK's second biggest supermarket chain, which has 13 stores in Northern Ireland, posted a 0.1% rise in like-for-like sales excluding fuel in the 15 weeks to January 7, which beat forecasts for a small fall in sales.

Boss Mike Coupe also hailed a robust performance from its recent Argos acquisition, saying a 4% surge in like-for-like sales "reinforced the case" for its £1.4bn takeover of Home Retail Group last year. The Sainsbury's sales growth comes after smaller rival Morrisons reported surprisingly strong trading on Tuesday, with a 2.9% rise in sales over the nine weeks to January 1 marking its best Christmas for seven years.

Shares in Sainsbury's jumped nearly 6% higher, with rivals Morrisons and Marks & Spencer also enjoying another day of stock market gains thanks to early signs of a solid Christmas for the sector after a tough 2016.

But Mr Coupe added a note of caution as supermarkets remain under pressure amid a fierce price war with discounters Aldi and Lidl, as well as pressure on costs from the Brexit-hit pound.

He said: "The market remains very competitive and the impact of the devaluation of sterling remains uncertain."

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

Sainsbury's said it saw record trading during the key Christmas week, with more than 30 million customer transactions and over £1bn of sales across the group.

Its online grocery arm saw sales lift by more than 9%, while the group's Tu clothing range delivered a 10% sales hike.

Best-sellers included Taste the Difference party food and prosecco, while across Argos there was strong demand for the iPad mini, PlayStation 4 computer games consoles and Fitbits.

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

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

Mr Coupe said supermarkets that now have an Argos digital store saw a 20% to 25% hike in total sales, and added that food sales in combined stores were enjoying a 1% to 2% boost as click-and-collect shoppers also popped in to pick up grocery items.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said that while the supermarket sales performance was better than feared, the Argos business came "to the rescue".

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."

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