Sainsbury’s reports first quarterly like-for-like sales growth for more than two years

The UK’s second-biggest grocer said like-for-like retail sales excluding fuel rose 0.1% in the fourth quarter, compared with a fall of 0.4% in the third quarter.

The uptick in sales is a significant boost for Sainsbury’s, coming after sales dropped 1.9% a year earlier amid an ongoing supermarket price war.

The sales figures come just days ahead of the March 18 deadline for increasing its offer for Argos owner Home Retail Group.

Sainsbury’s said it would create a “world-leading” retailer bigger than rivals John Lewis and Amazon UK when it tabled an improved £1.3billion offer for Home Retail in February.

But since then, South African retailer Steinhoff has attempted to gatecrash the supermarket’s cash and shares deal, with a £1.4bn offer.

Sainsbury’s chief executive Mike Coupe said the supermarket had delivered a “strong performance” in the fourth quarter, as it recorded like-for-like sales and volume growth while maintaining its market share. He added: “We are progressing well with our quality investment in 3,000 own-brand products.

“The new year is traditionally a time when customers focus on healthy eating and to cater for this demand we launched a number of vegetable-based product innovations including boodles (butternut squash noodles) and courgetti (spiralised courgette) which are proving extremely popular with our customers.”

Sainsbury’s refused to be drawn on whether it would pitch a third offer for Home Retail before the deadline, but reaffirmed its position that it would not pay over the odds for the company .

Mr Coupe said: “The Argos bid is not a must-do deal at any price and if it doesn’t go ahead then Sainsbury’s will continue.”

Shares in Sainsbury’s were down more than 1%.

Alongside the fourth quarter like-for-like sales growth for the nine weeks to March 12 2016, total retail sales excluding fuel also grew 1.2% over the period.

It is the first time the supermarket has seen like-for-like retail sales excluding fuel grow in a quarter since the third quarter of 2013/14 when sales edged up 0.2%.

Mr Coupe said the fourth quarter sales growth was the result of a “very rounded performance” from the business, which was bolstered by rising online sales and a strong performance from its clothing and entertainment divisions.

He said clothing sales had recovered after being hit by unseasonable weather in previous quarters, growing more than 10%, while strong releases, including Adele’s new album and James Bond movie Spectre, had seen entertainment sales rise nearly 11%. Online grocery sales climbed close to 14% over the period, while orders rose nearly 19%.

The company, which has 601 supermarkets and 773 convenience stores, said its promotional participation levels had reduced year-on-year, running at an average of 28% for the quarter.

It comes after Sainsbury’s announced in February that it would be the first UK retailer to end multi-buy and buy-one-get-one-free promotions.

Mr Coupe said the recent supply deal between rival supermarket Morrisons and online retail giant Amazon was “an interesting reflection of how the market was developing”.

But he said he “wouldn’t envisage getting into that kind of relationship” because Sainsbury’s already has a “successful online, food and clothing business”.

Shore Capital analyst Clive Black said the sales growth was a “welcome move” for Sainsbury’s and expects the supermarket to make a third offer for Home Retail Group in the coming days.