Sainsbury raises profit guidance after Argos integration boost

Supermarket group J Sainsbury raised its profit guidance as the integration of housewares chain Argos advanced more quickly than expected, bolstering the UK grocer's solid Christmas.

The London-based supermarket operator said it expects full-year underlying profit to be moderately ahead of the consensus analyst estimate of £559 million (€631 million). Sainsbury said the 2016 purchase of Argos, which offers everything from televisions to table fans via online and catalogue sales, would deliver as much as £20 million (€22.6 million) more to its earnings this year than previously expected.

The shares rose as much as 1.8 per cent early Wednesday in London.

Sainsbury continues a run of relatively strong results for the UK’s grocers that began with Wm Morrison earlier this week, after nonfood retailers like Debenhams and Mothercare issued profit warnings following weak Christmas sales.

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Growth in Sainsbury’s core grocery business provides further evidence that British shoppers were willing to swallow rising food prices over Christmas, amid signs that inflation stoked by the pound’s weakness may be levelling off.

Overall like-for-like retail sales rose 1.1 per cent in the 15 weeks through January 6th, Sainsbury said. That compares with analysts’ estimates for growth of 1 per cent.

Argos had a strong Black Friday sale before Christmas, Sainsbury said. But overall sales of general merchandise, which include the chain, fell in the latest period. That indicates the synergy benefits may stem largely from cost cutting. – Bloomberg