Sainsbury's Argos deal is on track

Mr Coupe said the food retail market remained competitive, citing pricing pressure and shrinking margins as the main consequences. Group sales rose by 2.1 per cent during the first half, but on an underlying basis supermarket sales fell 1 per cent, excluding fuel but including VAT. Mr Coupe said he wasn't sure what impact the recent devaluation of sterling would have on prices henceforth, although it's fair to say rivals such as Tesco (TSCO) and Morrison (MRW) have come under pressure from heavyweight suppliers such as Unilever (UNI) in recent weeks. General merchandising sales fared better, up 5 per cent during the period, with clothing sales ahead by 1 per cent despite a difficult year on the high street for fashion retailers.

If you're wondering what difference the Home Retail acquisition has made to Sainsbury's figures, the answer is not much - at least not yet. The deal only completed on 2 September, although analysts at Shore Capital pointed out that for the 13 weeks ended 27 August, like-for-like sales at Argos rose 2.3 per cent and grew 3 per cent during the second quarter alone. Sainsbury's management says it still expects to deliver £160m in synergies from transaction, and is on track to claw back £500m in cost savings by March 2018.

Argos should deliver an underlying profit contribution of £55m-£75m in the second half although, excluding this, continued price cuts and a step up in cost inflation will mean second-half underlying profit will fall short of those achieved in the opening six months.

Broker Shore Capital expects pre-tax profit of £591m for the year ending March 2017, giving EPS of 20.3p, compared with £587m and 22.1p in 2016.