Sainsbury's sales boost as deadline looms on Argos bid

Sainsbury's unveiled its first quarterly like'‘for'‘like sales growth in more than two years yesterday, three days before a key deadline on the supermarket major's £1.4 billion bid for Argos-owner Home Retail Group (HRG).

Sainsbury's has until Friday to make an offer for Home Retail Group or walk away

The grocer is in a two-way battle for Argos with South African retailer Steinhoff International and both suitors have until 5pm on Friday to make a firm offer or walk away.

Sainsbury’s made a cash and shares proposal for HRG in February worth £1.3bn, but Steinhoff trumped that with an offer worth 175p per share later in the month valuing the target at £1.44bn.

The standoff comes as Sainsbury’s chief executive Mike Coupe reported a 0.1 per cent same-floorspace sales rise in the company’s fourth trading quarter, the first since he took over from Justin King in 2014.

Coupe hailed a “strong performance”, but gave warning that the market would “remain competitive as food deflation continues to impact sales growth”.

He refused to be drawn on whether the group would pitch an improved offer to HRG before the Friday deadline, but stressed that “I don’t feel any personal pressure”.

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

The rise in like-for-like sales in the nine weeks to 12 March is Sainsbury’s first positive growth since the third quarter of the 2013-14 financial year and compared with a 0.4 per cent fall in Q3.

Coupe admitted the sales rise was due to strong internet revenues – up 14 per cent in the latest period – meaning that sales at its 1,200 supermarkets and Sainsbury Local convenience stores were still down.

Britain’s second biggest food retailer has a 17 per cent market share, and 8 per cent in Scotland where it is the fourth biggest player. “We are progressing well with our quality investment in 3,000 own-brand products,” Coupe added. “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 products including boodles (butternut squash noodles) and courgetti (spiralised courgette) which are proving extremely popular with our customers.”

The Sainsbury’s boss said clothing sales had recovered after being hit by unseasonable weather in previous quarters, growing more than 10 per cent, while strong releases – including Adele’s new album and the new James Bond movie, Spectre – had seen entertainment sales rise nearly 11 per cent.

“It perhaps lays down the myth that entertainment is all going online,” he said. Sainsbury’s added that it was continuing to phase out multi-buy offers in favour of more discounts on individual products.

Shore Capital analyst Clive Black said the sales growth was “welcome”, and that he expected the supermarket group to up its offer for HRG in the coming days.