Sainsbury's sales fall but Argos growth strengthens

Sales have fallen at Sainsbury's in the first nine weeks of the year, but the newly-acquired Argos reported strong growth.

The supermarket's like-for-like sales, which strip out new stores, fell by 0.5% in the period to 11 March.

However, Argos sales rose 4.3%, resulting in a 0.3% increase excluding fuel across the Sainsbury's group.

Sainsbury's said the market remained "very competitive" and the impact of cost pressures "remains uncertain".

The supermarket's performance was worse than the 0.1% rise in like-for-like sales seen in the 15 weeks to 7 January.

Sainsbury's convenience stores saw total sales growth of almost 7%, with 10 new outlets opening in the quarter.

Chief executive Mike Coupe said customers had welcomed Sainsbury's "differentiated food offer", with new products including butternut squash waffles and sweet potato tagliatelle.

General merchandise sales were down 4%, which Sainsbury's said was due to Easter and Mother's Day falling later this year.

Sainsbury's bought catalogue retailer Argos last year as part of its £1.4bn takeover of Home Retail Group.

The retailer has opened another 11 Argos Digital stores in Sainsbury's supermarkets since the start of the year, bringing the total to 41, while there are now eight Mini Habitat stores.

Shares fell almost 1% to 268.9p in morning trading and are down 4% over the past 12 months.

Neil Wilson of ETX Capital said Sainsbury's was being squeezed from all sides.

"Sainsbury's did very well when Tesco and others were struggling but is now facing its own challenges. It must contend with all the sector-wide problems like falling margins and the sterling squeeze from suppliers," he said.

"Falling margins and profits don't look great when the market is growing."