Sainsbury’s reveals strong sales

Sainsbury’s is off 2% despite reporting growth in like-for-like (LFL) sales for the 36th consecutive quarter.

Sainsbury's is trading at 361p after announcing a 0.2% increase in LFL sales excluding fuel in the 14 weeks to 4 January. The retailer stated the week before Christmas was the ‘busiest week ever’ with in excess of 28 million transactions registered.

The stock initially rallied after the opening bell, but once traders had time to read through the full update they realised that growth was a ‘small amount’ on the quarter, and learned that market conditions had been ‘tough and challenging’ for the supermarket.

As my colleague Alastair McCaig stated in his article on the retail sector last week, shops are willing to cut their prices in order to hold onto market share. Deep discount retailers like Lidl and Aldi have been eating into UK retailers’ profits.

Sainsbury’s stated that customers cashed in £120 million-worth of Nectar points during the run-up to Christmas, increasing 9% compared with the previous Christmas. This tells us something about consumer confidence in the UK.

Tesco and Marks and Spencer are reporting tomorrow. If these retailers reveal poor figures we could see the whole sector decline.

Sainsbury's plc chart

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