Sainsbury's to lift wages by 5% after bumper Christmas trade

Sales over the four weeks to January 4 rose 3.8%, and Sainsbury's said it expected annual underlying retail operating profit to increase 7% at the mid-point of its £1.01bn - £1.06bn guidance range.

Third-quarter underlying sales rose 2.8%, with grocery up 4.1% and general merchandise and clothing down 0.1%. The Argos business was 1.4% lower during the period.

Party food sales were up nearly 40% in the festive season, with more than 200 bottles of fizz sold every minute in the key days ahead of Christmas.

Staff across both Sainsbury's and Argos will move to £12.45 per hour in March, and £13.70 for those based in London, matching the Real Living Wage, which is higher than the national minimum wage, with a further increase to £12.60 per hour in August and £13.85 respectively.

"Within the supermarket sector, where prices are central to success, remaining competitive comes at a cost. For Sainsbury, the investment in lowering prices over recent times will come under additional pressure, especially following the outcome of the measures announced in the Budget," said Interactive Investor head of markets Richard Hunter.

"Even so, the recently announced rise in UK food inflation should allow some of the larger players to pass on some of those costs. In the meantime, the availability of discounts came into their own over the festive period, bolstered by seasonal offers which underpinned the sales growth."

"The weakness in the price in early trade adds to what has been a difficult time of late, with the shares having fallen by 14% over the last year, as compared to a gain of 8.7% for the wider FTSE 100."

"In turn, this leaves the shares down by some 4% over the last three years, which is a tepid return. By the same token it also leaves Sainsbury on an undemanding valuation and while the group is far from snatching Tesco’s crown as the preferred play in the sector, the progress it has been able to achieve leaves the market consensus at a buy on prospects.”

Reporting by Frank Prenesti for Sharecast.com