Sainsbury's warns of price 'uncertainty' as supermarket reports falling sales

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

Online sales rose but the core supermarket business has endured a tough year (Getty)

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.

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.