Sainsbury’s is poised to report growing sales amid its first quarter results this week, boosted by strong performance its Argos fascia and rising inflation.
Analysts are predicting that the retailer’s sales are likely to see growth of two per cent, a boost from last quarter’s 0.3 per cent growth.
Just as was seen with its largest rival Tesco last month, Sainsbury’s is thought to have done well out of rising inflation, which is now at its highest level since 2013.
Although this can help boost sales, it also runs the risk of pushing customers to budget grocers like Aldi and Lidl if prices are not kept competitive.
In March, the company revealed a 8.2 per cent drop in bottom-line profits to £503 million for the full year, alongside an underlying profit drop of one per cent. This marked the third straight year of falling profits for the UK’s second largest grocer as it warned over waning consumer confidence.
This quarter will mark the first that both Sainsbury’s and Argos’s profits will be combined since the £1.4 billion merger with Home Retail Group.
Analysts are predicting Argos would post similar growth to last quarter with a four per cent boost, propping up its parent company’s grocery arm despite the inflation boost seen since Brexit.
Sainsbury’s is also looking to continue its growth strategy, with a possible takeover of convenience store chain Nisa now on the cards.
“We can see the strategic rationale of Sainsbury’s boosting food buying volumes by well over five per cent at a time when the business struggles to do so organically,” analyst at Jefferies James Grzinic said.
“The rumoured £130 million price tag would be good value and helpfully accretive when considered under this light.
“However, this also underlines the need for such actions at a time when the core food business has been lagging peers for much of the past year.”