SHARES in J Sainsbury fell sharply after a fall in general merchandise and clothing sales and a weaker performance by Argos appeared to overshadow strong grocery performance at Christmas.
Britain’s second biggest supermarket group updated the City on festive trading as chief executive Simon Roberts responded to questions on potential disruption to supply chains because of attacks on commercial ships by Yemen’s Houthi rebels in the Red Sea.
Mr Roberts said delivery times for wine and general merchandise faced delays because shipping companies were altering routes to avoid the attacks, adding thousands of more miles to journeys.
Concerns over supply chains were highlighted as investors sent shares in Sainsbury’s tumbling by nearly 6%, despite delivering grocery volume growth ahead of the market for a fourth consecutive Christmas.
Total sales at Sainsbury’s, excluding fuel, increased by 4.9% in the six weeks to January 6 compared with the same period last year, and by 6.5% over 16 weeks to that date, underpinned by a strong grocery performance.
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The retailer’s first Christmas “powered by Nectar (discount scheme) prices” saw grocery sales increase by 9.3% in the third quarter, including Christmas grocery sales growth of 8.6% in the six weeks to January 6, with stronger volume growth offsetting lower inflation.
It said Nectar prices were available on more than 6,000 products, which Mr Roberts said had helped customers save an average of £16 on an £80 shop.
However, general merchandise sales at Christmas were down 3.7% in the six-week festive period (1.3% excluding the impact of the closure of Argos in the Republic of Ireland), which the company said reflected a significant benefit to sales last year from the postal strike and strong demand for energy-saving products, when domestic fuel costs were soaring.
Clothing sales meanwhile plunged by 6% over the six weeks, and 1.7% in the 16 weeks to January 6.
The company held profit expectations for the year in the region of £670 million to £700m.
Russ Mould, investment director at AJ Bell, said: “Sainsbury’s has a ‘food first’ strategy and the big question from its Christmas trading update is whether management is guilty of neglecting the other parts of the group.
“Non-food sales were very disappointing, implying that Sainsbury’s is either leaving areas like clothing and Argos’ general merchandise offering to wither away or it simply isn’t pushing the products that people want.
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“Sainsbury’s partially blames tough comparative figures from the previous year, yet it does feel as if Argos, in particular, has been bumped down the list of priorities for the group since Simon Roberts took over as chief executive.”
Mr Roberts said: “We've worked hard to really deliver for our customers this quarter and have grown grocery volumes ahead of the market for the fourth Christmas in a row. More customers are choosing to shop at Sainsbury's, recognising our determined focus on value, product innovation and service.
“This was our first Christmas powered by Nectar Prices, helping customers save an average of £16 on an £80 Christmas shop. We delivered our best ever value Christmas roast and customers bought record numbers of pigs in blankets, mince pies and sparkling wine. Taste the Difference sales grew ahead of the market as families treated themselves.”
Meanwhile, Mr Roberts said the company was working to reduce potential disruptions and costs from redirected shipments in the Middle East.
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He said: "Through the last three or four weeks our team have spent time working out how to get the impact to an absolute minimum. The vast majority of container ships are instead going around the Cape of Good Hope which is making journeys 10 to 14 days longer.
"We are working on our sequencing of orders to ensure we always have good availability in product areas which can travel through these routes, such as general merchandise and wine. Getting products from across the world is an important issue for the Government, so we are on regular calls to make sure we have the latest intel and understand the potential impacts."
Last week, fashion retailer Next said stock deliveries and sales could be affected if the attacks continue to disrupt the vital shipping route.
Shares in Sainsbury’s closed down 6.34%, or 19.4p, at 286.5p.
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