J Sainsbury PLC (LSE:SBRY) said it is on course to deliver over £1 billion in underlying profit from its retail business this financial year after notching up its biggest ever Christmas, with customers snapping up more fresh food and turning to its premium ranges in record numbers.
The UK’s second-largest supermarket group said sales rose 3.9% in the 16 weeks to 3 January, with grocery sales up 5.4%.
While demand for clothing and general merchandise dipped slightly, food sales over the festive period proved the standout, rising 8% in fresh categories and 15% in its Taste the Difference premium brand.
Simon Roberts, chief executive, said: “We have won grocery market share for the sixth consecutive Christmas period. More customers switched to Sainsbury’s, trusting us for both great value essentials and premium Taste the Difference products in their big Christmas shop.”
The company also said it expects to generate more than £550 million in retail free cash flow this year, up from a previous forecast of over £500 million, allowing it to press ahead with a return of more than £800 million to shareholders, including a £250 million special dividend and a share buyback of the same size.
Sainsbury pointed to the strength of its food business as the driver of its performance, despite a weaker market for general merchandise and clothing. Sales at Argos, which it owns, fell 1% in the quarter.
However, customer volumes rose and the group gained market share in homewares, electricals and toys, helped by a 6% rise in sales at its Habitat brand.
Fresh food proved a major draw over the holidays, with the supermarket saying it sold 20% more turkeys than last year. Roberts said its efforts to offer both affordability and quality through initiatives like Aldi Price Match and Nectar loyalty pricing were “resonating” with shoppers.
Nearly two million customers redeemed their Nectar points in December, saving an average of £25 on their Christmas shop.
Taste the Difference was the fastest-growing premium own-brand range in the market, with new festive products such as Cherry & Amaretto Panettone and Crispy Chicken Bao Buns helping to boost sales. The company launched over 260 new lines in the quarter.
Sales through its online grocery business jumped 14%, driven by more orders and larger baskets, while convenience stores saw record trade on Christmas Eve, Boxing Day and New Year’s Eve.
Clothing, sold under the Tu brand, saw strong performance in seasonal lines despite weaker overall demand. Sainsbury said it sold a record number of Christmas pyjamas, and outperformed the wider clothing market by 10 percentage points in volume growth.
The supermarket has been reshaping store space to give more prominence to food ranges and said this helped contribute to market share gains.
It also credited investments in technology and supply chain efficiency for smoother trading during the crucial festive period.
Sainsbury said it remains on track to deliver £1 billion of cost savings by March 2027.