J Sainsbury PLC (LSE:SBRY) shares rose after the grocer reported a smaller slowdown in sales growth than was expected and stuck with its full-year guidance despite warning of increased uncertainty due to the Iran war.
Britain's second-largest supermarket posted a first-quarter update for the 16 weeks to 20 June showing total retail sales excluding fuel up 2.7%, with like-for-like sales up 2.1%.
Growth has taken a step down since last year, when 4.8% in Q1 slowed to 3.8% by Q4, but was better than the 2.1% that City analysts expected.
Grocery sales for the first period of the new financial year were up 3.6%, driven by volume growth, while online grocery sales increased 12.5%. Grocery growth also beat the analyst consensus forecast of 3.4%.
Argos sales slipped 0.5%, which was better than expected, thanks to sales of fans during the May heatwave and large-screen TVs ahead of the World Cup
General merchandise and clothing sales fell 3.7%, which was worse than forecast.
Chief executive Simon Roberts said customers were "looking for value now more than ever" and pointed to strong performances in fresh food, online grocery and convenience stores during the spring heatwave and key seasonal events.
He kept guidance unchanged for underlying operating profit of £0.975-1.075 billion and retail free cash flow of more than £500 million, although the impact of the Middle East conflict on both customers and the business "remains uncertain".
The group said it was also still on track to deliver £1 billion of cost savings by March 2027.
Shares rose 2.5% to 323.7p in early trading.
Broker Jefferies said the update was a "small beat" against expectations.
Analysts noted that strength for Argos was driven by volumes rather than value, with core seasonal categories were softer. As a result, Jefferies said consensus forecasts were unlikely to move much.
House broker Shore Capital was more optimistic, saying: "With a Q2 tailwind, the bottom end of the current guided [underlying earnings] range may yet be raised."
** UPDATE: Adds shares, analyst forecast details and comments **
