Sainsbury’s said pressure on prices was “uncertain” as it posted a drop in sales in the first nine weeks of 2017.
Supermarkets are facing sharply higher import costs as a result of the fall in the pound against the dollar and the euro since the Brexit vote last June.
Britain’s second-largest supermarket said trading remains “very competitive” as it reported a 0.5 per cent fall in like-for-like supermarket sales, excluding fuel, in the period ending 11 March.
The company saw a boost from its recent acquisition of catalogue retailer Argos, where sales grew 4.3 per cent over the nine weeks. Argos helped lift overall comparable sales to 0.3 per cent.
Sainsbury’s said sales were hit by the fact that Mother’s Day and Easter are later this year meaning they fall outside this reporting period.
Sales of the Tu clothing range were up 5 per cent, while convenience store sales were 7 per cent higher, helped by the opening of 10 new outlets.
Group chief executive Mike Coupe said he was “pleased” with the company’s performance.
But he added: “The market remains very competitive and the impact of cost price pressures remains uncertain.”
Neil Wilson of ETX Capital said: “Strip out Argos and these figures from Sainsbury’s don’t look so clever.
“Christmas sales were driven by non-food and investors will have to consider where the core grocery business is headed when it increasingly looks it’s being propped up by clothing and Argos.”
Sainsbury’s completed its takeover of Argos owner Home Retail Group in September last year in a £1.4bn deal and has begun integrating the brand into its larger supermarkets.
The group has so far opened 41 Argos Digital stores, 11 of these were opened in the fourth quarter alone, while it also now has eight Mini Habitat stores in its supermarkets.
Least ethical supermarkets
Least ethical supermarkets
1/11 11) The Co-operative
With an 11.0 rating, the Co-op comes out as the most ethical supermarket
2/11 10) M&S
At 10, Marks and Spencer is relatively high
3/11 9) Ocado
Delivery service Ocado's motto is "quality food that doesn't cost the earth"
4/11 8) Waitrose
Waitrose was the 4th most ethical on the list
5/11 7) Aldi
Aldi surprisingly beat some of its up-market rivals
6/11 6) Sainsburys
Sainsburys received a score of 9 for environmental ethics
7/11 5) Morrisons
Morrisons is the 5th least ethical supermarket in Britian
Tesco was the 4th least ethical, with an environmental score of 7
9/11 3) Iceland
Iceland was the third least ethical
10/11 2) Lidl
Lidl was Britain's second most unethical supermarket for its impact on the environment and its reputation for throwing away unused food.
11/11 1) Asda
Asda is the least ethical, Ethical Consumer added: "In most cases your local independent grocery or wholefood shop will be the most ethical place to shop."
Mobile phones, video games and sports equipment sold particularly well in the quarter, Sainsbury’s said.
The company’s core supermarket business has been damaged by a price war as German discount chains Aldi and Lidl continue, as well as pressure on costs from the Brexit-hit pound.
According to figures from Kantar, food inflation doubled last month to 1.4 per cent year on year as the cost of everyday staples such as butter and tea rose.
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