With no clarification yet on its speculative £1.3bn takeover of Argos owner Home Retail (HOME), Sainsbury's (SBRY) hoped to distract the market this week with a better than expected fourth quarter trading update. Underlying transaction and volume growth helped nudge like-for-like sales into positive territory - 0.1 per cent excluding fuel sales, to be exact - for the first time in two years. That also marked an improvement on the previous quarter, which reported a 0.4 per cent decline.
The update covered the nine weeks to 12 March, a period when customers are particularly focused on healthy eating according to chief executive Mike Coupe. New product lines, including spiralised butternut squash - or 'boodles' - as well as the more ubiquitous 'courgetti' have proved extremely popular with shoppers.
Sainsbury's has also limited its involvement in promotional deals. This might have been prompted by recent research conducted by the Money Advice Service, but the supermarket chain reckons its customers are not compelled by multi-buy promotions anymore. The vast majority of these promotions will be phased out by August.
Rumour has it desire for the Argos distribution network lies behind Sainsbury's bid for Home Retail Group. It might need it too, as online sales grew nearly 14 per cent during the fourth quarter, with the number of online orders up 19 per cent, suggesting its customers are increasingly shopping through this channel. The company has until 18 March to make a renewed bid for Home Retail after South African group Steinhoff made a counter offer in late February.
As per usual, the clothing division fared better than food. Clothing grew 10 per cent during the final quarter, helped by a successful launch of Gok Wan's 22nd collection for the supermarket. Mr Coupe says the market as a whole for grocers remains competitive and deflationary, but encouragingly Sainsbury's was able to hang onto its market share during the fourth quarter.
