Investors await Sainbury’s trading update after Argos acquisition

Photo:: PA Wire

Photo:: PA Wire - Credit: PA

Sainsbury’s will update the market on fourth-quarter trading this week as investors look for any signal that British shoppers are reining in spending as inflation creeps up.

Photo: Lauren Hurley/PA Wire

Photo: Lauren Hurley/PA Wire - Credit: PA

The UK’s second biggest supermarket, which last year acquired Argos, reported better- than-expected sales over Christmas.

But analysts at Bank of America (BoA) have pencilled in a 0.3% dip in like-for-like sales at Sainsbury’s over the fourth quarter.

BoA’s Xavier Le Mene said: “Overall Sainsbury’s has been lagging the remaining Big Four peers, and Kantar suggests this will continue in the fourth quarter.”

Sainsbury’s boss Mike Coupe sounded a note of caution in January, as the supermarket faces a continuing sector price war and pressure on costs and shelf prices from the Brexit-hit pound.

Photo: John Stillwell/PA Wire

Photo: John Stillwell/PA Wire - Credit: PA

The fall in the value of sterling since last year’s vote has seen the cost of imports rocket, with many businesses passing the costs on to consumers. The net result for supermarkets has been average basket sizes falling while figures from Kantar show food inflation doubled last month to 1.4% year on year.

On Thursday, shares in Morrisons took a dive after the supermarket warned over the potential cost impact from the pound’s collapse.

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However, like-for-like sales are tipped to have grown 2% at Argos over the quarter.

Graham Spooner, investment research analyst at The Share Centre, expects an update on cost savings and the integration of Argos into the group.

“Investors will be keen to hear an update on the recent Home Retail (Argos) acquisition and that Sainsbury’s remains on track with its cost savings.

Mr Coupe said in January that Sainsbury’s supermarkets which 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.