Sainsbury's keeps up with the peloton as mountains loom

The supermarket posted a 0.1 per cent rise in festive sales which might not look much when compared to its rivals, but was better than expected

Sainsbury’s, the supermarket slowcoach? After Morrisons wowed the City and Aldi released some good-looking, if detail light, numbers, Sainsbury’s underwhelmed by comparison.

The release of its festive figures - for the 15 weeks to 7 January - showed that sales at stores open at least a year inching up when compared to last year, but only by 0.1 per cent.

That, however, was better than many analysts had expected and looks quite creditable when you consider the all important context.

Over the last few months Tesco, and Morrisons, have revived themselves. That was always likely at the former, not so much at the latter which managed to do a decent impression of being dead in the water before someone threw it a rope named David Potts.

Meanwhile, Aldi and Lidl have continued to snatch market share by opening new branches up and down the country. Sainsbury’s execs have also had their hands full with integrating Argos, and making that business fly under their umbrella.

In other words, all the conditions were in place for this business to stumble. Instead the core supermarkets held their own. Just about. And Argos gave the company a Black Friday boost with a 4 per cent rise in same store sales.

We’ll have to wait a while to see if Argos made any money for its parent from the discounted product it was pushing. Analysts at Jeffries highlighted a bias towards lower margin lines at the general merchandise retailer, such as consumer electronics, which should concern anyone worried about earnings. And dividends.

But perhaps that’s being churlish because, really, Argos' performance was pretty good, particularly given where the business once was.

The problem is not a now in which Sainsbury’s is keeping up with the peloton. It’s the future, and Sainsbury’s ability to do that as the race shifts into some high mountains.

I’ve mentioned earnings, and the range of forecasts for this company's is remarkably wide given how closely big businesses tend to manage the expectations of City scribblers. Analysts forecasts range from £378m to £707m.

Last year’s underlying pre tax profits came in at £681, so Sainsbury’s would need to come in right at the top of that range to avoid posting its fourth consecutive fall in annual profits.

Industry data indicates Sainsbury’s prices are rising after two years of falls, which could help. But will its customers wear that? Especially if they have a Morrisons nearby. The latter has been cutting prices and has a bias towards home produced fare. That should make Britain’s number four supermarket chain better able to keep prices low in the face of the impact that the weak pound is having on imports.

Sainsbury’s has been cycling very fast and has managed to do just a little bit better than sitting still.

This is a retailer that has made a habit of proving its doubters wrong. It has an effective management team led by chief executive Mike Coupe, and a strong brand. But the next stage is going to tax their pedalling power and the shares’ recent exuberance - they topped the FTSE 100 table upon the release of its numbers - looks overdone.