Sainsbury boosted by weather as Argos buy pays off

Early summer barbecues and higher prices proved a potent combination for UK supermarket chain Sainsbury, as its acquisition of Argos appears to be paying off.

As sweltering temperatures lifted demand for everything from burgers to paddling pools, like-for-like retail sales rose 2.3% in its first financial quarter, Sainsbury said, beating analysts’ estimates.

While boosted by the weather and Brexit-fueled food-price inflation, the sales also provided backing for the strategy of chief executive Mike Coupe, whose £1.4bn (€1.59bn) takeover of Argos last year initially drew investor scepticism.

The shares rose almost 1% at one stage. Sainsbury’s figures are the first since the retailer moved to a new reporting structure in which it no longer splits out individual sales performances at Sainsbury and Argos stores.

Total general-merchandise and clothing sales rose 1% and 7.2%, respectively. Sales at convenience stores increased 10%, the company said, highlighting the performance of one of the UK’s most dynamic retail sectors.

Mr Coupe downplayed recent signs of a slowdown among UK consumers, saying shoppers are in “broadly the same place” they were at Christmas.

The CEO also appeared to cool speculation over the possibility of more acquisitions, saying the company is always holding conversations, most of which come to nothing.

Sainsbury is said to be studying the books of Nisa Retail, with a possible bid expected to value the corner-store supplier at around £130m.

The interest in Nisa follows Tesco’s surprise acquisition of Booker Group, which is currently being reviewed by regulators.

The UK’s two leading grocers are seeking to broaden their presence in the fast-growing convenience market, as discounters Aldi and Lidl continue to increase their share of supermarket spending.

A combination of Sainsbury and Nisa, which generated revenue of £1.3bn last year, would be considerably smaller than that of Tesco and Booker, which if completed would mean the UK’s leading grocer would end up supplying about 30% of the UK’s convenience-store market.

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