J Sainsbury (SBRY) shares were remarkably resilient despite a 0.5 per cent contraction in like-for-like retail sales during the fourth quarter. Early headlines highlighted the relapse from quarter three, when the supermarket chain had moved into positive sales territory on this front.
But the share price has held up thanks to Sainsbury's increasingly diverse business model - a result of its acquisition of Argos from Home Retail Group a year ago. Sales there rose 3.8 per cent, or 4.3 per cent on a like-for-like basis during the final quarter. Bringing the two businesses together, like-for-like sales for the group rose 0.3 per cent over the same period.
The market did voice its concern that Sainsbury's top-line growth wasn't stronger on the grocery side given the expectation that British supermarkets should benefit from a more inflationary environment. After all, it seems to have helped Argos outperform the wider market by a couple of percentage points, according to analysts at Shore Capital. Wage and currency pressures have prompted a swathe of price increases across multiple retailers this year, with further cost inflation expected should sterling stay at current levels and company hedging policies expire.