Online shoppers and strong clothing sales helped Sainsbury's enjoy a record week over Christmas, leading to the supermarket chain to beat analyst predictions for the crucial trading period.
The grocer reported a 0.1pc rise in like-for-like sales over the 15 weeks to January 7, ahead of City expectations for the supermarket to post another slight fall in sales. In response Sainsbury's shares jumped by 13.3p, or 5pc, to 272p on the back of the update.
Supermarkets enjoyed a bumper festive season this year as extra trading days led to shoppers making a last dash to buy festive food in the week before Christmas.
Mike Coupe, Sainsbury's chief executive, commented: "Christmas came late. The group took a record £1bn worth of sales in the final week leading up to it."
Sainsbury's total sales during the period also rose by 0.8pc, if the recent sale of its pharmacy business is excluded. Including the impact from the sale of 281 pharmacies, Sainsbury's retail sales were down by 0.3pc.
Mr Coupe called it a "credible performance in a challenging market".
<>Meanwhile, Sainsbury's recent acquisition of catalogue retailer Argos paid off over Christmas as sales toys and electricals boosted the group. Argos recorded a 4.1pc lift in total sales and like-for-like sales growth of 4pc, taking the combined company's like-for-like sales growth to 1pc.Mr Coupe revealed that in supermarkets where Argos concessions had been added the stores enjoyed a 1pc growth in sales. The Sainsbury's boss said that strong trading had "reinforced our confidence in Argos and our ability to execute on that transaction".
However, clothing was a star performer for the supermarket with sales of it Tu range lifting by 10pc, indicating that Sainsbury's is continuing to steal market share from its struggling fashion rivals on the high street.
The company revealed that during the quarter online sales made up a record 18pc of total group sales. Online sales grew by 13pc at Argos, accounting for 57pc of the shop's revenue.
Online grocery sales meanwhile grew by 9pc, in part thanks to 200 new click and collect sites that opened over the past year.
"Against a backdrop of food deflation, flat sales are a pyrrhic victory for the supermarket, and represent an improvement on performance so far this financial year", said Laith Khalaf, senior analyst at Hargreaves Lansdown.
"Sainsbury’s did see positive sales momentum in its online offering and in convenience stores, which suggests these channels picked up the slack from the big supermarket outlets", Mr Khalaf said. "This is part and parcel of an ongoing shift in customer preferences, away from big out of town supermarkets in favour of shopping from the comfort of their own home, or at a local convenience store."
Mr Coupe has faced criticism over the £1.4bn Argos takeover from analysts who have been concerned that the supermarket's attention on toys, electrical and fashion could lead to the grocer being distracted from the intense food retail price war.
<>However, the Sainsbury's boss hit back and said: "Grocery retailing has been challenging but we see a spolution to that when we add Argos sites to our stores sales go up. So we have confidence in our ability and feel destiny is in our own hands."The business is changing, but it is changing in the right way and a sustainable way," he added.
Sainsbury's has been striving to be more competitive in the face of intense competition from the discounters Aldi and Lidl and has stripped out the majority of its multi-buy promotions.
Mr Coupe said that customers paid 14pc less for a typical Christmas basket at Sainsbury's than two years ago and revealed that deflation was running at around 0.5pc during the third quarter.
Industry figures from Kantar have suggested that price rises are beginning to return to stores as inflation returns to the market after a sustained period of deflation.
The Sainsbury's boss warned: “The market remains very competitive and the impact of the devaluation of sterling remains uncertain. However, we are well placed to navigate the external environment and remain focused on delivering our strategy.”
Morrisons has already reported it strongest Christmas in seven years, posting a 2.9pc rise in like-for-like sales for the nine weeks to 1 January.
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