The results, which exceeded analysts’ expectations of a 1.9% rise, were boosted by the combining of Argos and Sainsbury’s trading data for the first time, strong retail sales and food inflation.
Sainsbury’s acquired Argos last year in a £1.4bn takeover.
The supermarket’s shares rose 1.5% in early morning trading as it reported that sales for the 16 weeks to 1 July were boosted by a 1.9% increase in transaction growth at Sainsbury and a 3% rise in grocery sales.
Meanwhile, online sales at Argos rose 10%, with a 36% increase in Argos Fast Track delivery and a 64% rise in collection.
This increase in online activity was driven by customer activity during the hot weather when people wanted to buy and receive products such as paddling pools and fans on the same day.
Mike Coupe, group chief executive at Sainsbury’s, said: “The market is competitive and we continue to manage cost price pressures closely. Our strategy is delivering and we are well placed to navigate the external environment.”
Helal Miah, investment research analyst at The Share Centre, said interested investors should acknowledge that so far the acquisition of Argos, which many had been sceptical about, looks to be paying off.
He added: “The integration of Argos outlets continues at a good pace, with Argos’s same day delivery service for online shoppers is proving to be particularly attractive.
“We continue to recommend Sainsbury’s as a ‘hold’ for medium risk investors seeking a balanced return.”
But Laith Khalaf, senior analyst at Hargreaves Lansdown, said despite the strong results, the bigger picture remained challenging for the UK supermarkets as weaker sterling is pushing up food prices and the trading environment remains as competitive as ever.
“Indeed, the turf war the big supermarkets have been fighting against the discounters may start to look like a schoolyard skirmish if Amazon decides it wants a piece of the UK grocery market,” he added.
“The Amazon Fresh service is already being trialled in the UK, and the online retailer’s recent purchase of Whole Foods sent shock waves through the sector.”
