Sainsbury’s reported higher Christmas sales off the back of strong food sales from an at-home dining boom.
But shares fell 4.68 per cent to 313.60p as sales growth failed to impress investors against a weaker performance in its fashion and Argos units.
Britain’s second biggest supermarket saw total sales rise 3.3p per cent over the six weeks to 3 January, and for the quarter by 3.9 per cent to £10.3billion.
The strong festive performance allowed Sainsbury’s to maintain its full-year guidance of retail underlying profit to exceed £1billion, while increasing its cash flow estimate from £500million to over £550million.
Festive food to do well included more than 260 new products in its premium own-label, Taste the Difference.
Festive cheer: Sainsbury’s increased food sales over Christmas but its clothing division suffered
The supermarket said mini Wagyu cheeseburgers and crispy chicken bao buns, as well as cherry and amaretto panettone did well.
Chief executive Simon Roberts said the range ‘continues to go from strength to strength, as customers want to treat themselves at home.’
Performance in its other divisions was less encouraging, with general merchandise and clothing sales falling by 1 per cent over Christmas and 1.1 per cent over the third quarter.
Another slump in sales at Argos – down 2.2 per cent over the festive period – will raise further questions as to whether it should be sold.
The supermarket expects to return £800million to shareholders, including a special dividend of £250million and a share buyback programme of the same value.
‘This will lift the dividend yield to a punchy (if temporary) 7.5 per cent including specials, with the 4.2% underlying yield also an attraction,’ said Richard Hunter, head of markets at Interactive Investor.
‘An incremental market share increase and Sainsbury’s generally sturdy efforts of late have lifted the share price by 21 per cent over the last year, bang in line with the performance of the wider FTSE100, although the shares have dipped on the open given the lighter GM and Argos contributions.
‘While Tesco marginally remains the preferred play, the market consensus of Sainsbury as a buy is nonetheless a vote of confidence from investors for the longer term.’