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Sainsbury’s (SBRY) has lifted its profits expectations for the year after a record Christmas week, but the supermarket’s growth was held back by declining general merchandise sales as Argos struggled.

Total retail sales in the 15 weeks to 6 January were up 1.2% (excluding fuel) and like-for-like sales grew by 1.1%.

Grocery sales chalked up growth of 2.3% during the third quarter, with online and convenience up 8.2% and 7.3% respectively.

However, general merchandise sales decreased by 1.4%, on top of a 1.6% drop in the previous quarter, and clothing sales slowed from a 6.3% jump in the second quarter to just 1% growth in the past three months.

Sainsbury’s said its general merchandise and clothing performance had outperformed the market in challenging conditions, with Argos registering record sales over the Black Friday period.

The supermarket raised its underlying pre-tax profits forecasts for the year as a result of better-than-expected savings from its acquisition of Argos. EBITDA synergies are predicted to be in the £80m-£85m range by March 2018, ahead of previous guidance of £65m.

Sainsbury’s added it was on track to achieve £185m of cost savings this year, exceeding its three-year target of £500m by £40m.

“We’re pleased with our performance across the group this quarter,” CEO Mike Coupe said. “We had a strong Christmas week, with record sales, over 340,000 online grocery orders and stellar growth in Argos Fast Track delivery and collection. Online accounted for 20% of the group’s sales during the quarter.

“We delivered an excellent operational performance across the group, with great availability, strong customer satisfaction scores and our lowest level of waste ever at Christmas. Friday 22nd was our biggest sales day for stores and we also delivered an online grocery order to customers every second. Customers bought more Taste the Difference food than last year as people treated themselves and our popular 25p veg lines helped our customers live well for less.

“General merchandise and clothing grew market share in a challenging market. Argos stores in Sainsbury’s supermarkets performed particularly well and Argos saw record sales across the Black Friday period.”

Shares in Sainsbury’s have jumped 1.8% to 252.9p as markets opened this morning. It comes on top of an almost 3% hike yesterday as investors reacted positively to a better-than-expected Christmas at Morrisons.

Morning update

Lidl has revealed a record Christmas as shoppers flocked to the discounter in December.

Sales across its estate were up 16% year on year over the month and the supermarket experienced its highest ever footfall.

The busiest day of the season, which was also a record trading day in Lidl UK’s history, came on 22 December, while the week commencing 18 December was its strongest ever trading week.

It follows a 15% jump in Christmas sales reported by fellow discounter Aldi last week, as customers sought out premium products at a lower price.

Lidl UK CEO Christian Härtnagel said: “Lidl UK has had a fantastic 2017 and this was capped by our strongest Christmas trading period to date.

“Customers came into our stores to buy more of their Christmas items, knowing they could find high quality products at market-leading prices. The commitment of our 20,500 colleagues across the country was key to our success during this busy period and I’m extremely grateful for their contribution.

“We look forward to bringing the Lidl offering to more communities across the UK, as we continue our rapid expansion plan this year.”

Lidl’s Birchwood Farm whole fresh turkey contributed to a 10% increase in turkey sales in the period, with overall fresh meat and poultry sales up by 17%.

About 600 tonnes of Brussels sprouts, 17 million mince pies and more than 800,000 litres of Champagne and Prosecco were sold, with sales of the latter up 25% and 60% respectively.

Lidl’s Deluxe Christmas pudding was one of the best-selling products in the range, contributing to a 60% increase in its luxury Christmas pudding sales, the business added.

Premium alcohol products also contributed to growth, with the introduction of new Deluxe liqueurs for the festive season, including crème de cassis, triple sec and cherry brandy. The bestselling products in this range were Lidl UK’s Hortus pink gin liqueurs, with 644 bottles being sold every hour throughout the Christmas period, contributing to a 39% increase in total gin sales.

Lidl UK’s store expansion also continued apace in December, with the openings continuing throughout the holiday season. Nine new stores opened during this period and Lidl UK ends the year with 693 stores, up from 650 at the end of 2016.

The 700th store is set to open early this year. To support its ambitious expansion, the supermarket also announced a new RDC for Greater London this week, which will be based near Luton and could potentially create up to 1,000 new jobs.

Yesterday in the City

Morrisons (MRW) shares shot up 2.9% to 233.4p after the supermarket smashed the City’s expectations for its Christmas trading. The Yorkshire-headquartered grocer reported a 2.8% uplift in group like for like sales over the ten weeks to 7 January and a 3.7% jump over the Christmas period.

The strong performance dragged shares in Sainsbury’s, which reported its own figures this morning, 2.8% higher to 247.8p.

After an early morning jump Tesco (TSCO) ended the day flat at 214.3p, despite data from Kantar Worldpanel showing the business as the clear winner of the big four over the festive period.

Marks & Spencer (MKS) also registered a 2.5% boost to 318.6p. However, the high street bellwether is expected to reveal on Thursday that it struggled over Christmas, with food in decline as Aldi and Lidl lured away customers.

Cigarette giant British American Tobacco (BAT) rose 0.8% to 6,837p after it announced it expected to see a boost to earnings thanks to a tax overhaul by US president Donald Trump.

The strong performance from these FTSE 100 constituents contributed to London’s blue-chip index ending the day on a new record high after climbing 0.5%, or 34.51 points, to 7,731.02 points.

Majestic WINE (WINE) wasn’t among the day’s risers despite putting in a solid Christmas performance, with shares down 1.1% to 454p. Majestic saw sales rise 3.2% over the 10 week Christmas trading period ending 1 January as high demand for fizz buoyed its retail performance and Naked Wines bounced back from a difficult period. However, growth was way down on a year ago.

Fellow listed alcohol group Stock Spirits (STCK), which focuses on markets in Eastern Europe, climbed 2.8% to 272p after it announced in a pre-close trading update for 2017 that its annual results would be better than previously forecast.

SSP Group (SSP) fell 4% to 655.5p yesterday, with B&M European Value Retail (BME), WH Smith (SMWH) and Ocado (OCDO) also down 2% to 401.7p, 0.9% to 2,236p and 0.8% to 425.8p respectively.

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