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Sainsbury's Stock Surges on Modest Sales Growth, but Challenges Remain

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Tesco said UK like-for-like sales in the six weeks to January 7 rose by 0.7

Total group sales for the 15 weeks to 7 January rose 0.8%, with group LFL sales up 1.0% as weak LFL growth from the supermarkets business of 0.1% was offset by a 4% gain from Argos.

Britain's second largest supermarket chain said online groceries, convenience stores, clothing and other non-food all performed strongly in the third quarter.

Industry figures from Kantar have suggested that price rises are beginning to return to stores as inflation returns to the market after a sustained period of deflation.

Richard Hunter, Head of Research at Wilson King Investment Management, said: "Whilst these Sainsbury numbers are not sufficient to shoot the lights out, they are comfortably ahead of expectations".

He adds: "It increasingly looks like Sainsbury's is losing market share, notably to Tesco, as the latter is enjoying a rebound".

Sainsbury's chief executive Mike Coupe said: "We had a record Christmas week, with over 30 million customer transactions at Sainsbury's and over £1 billion of sales across the Group".

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The British arm of the German discount supermarket said it enjoyed its most successful Christmas trading period ever, with sales on a year-on-year basis up 10 percent in December. "We believe we have our destiny in our own hands".

It said the brand had a strong online performance over the Black Friday period, with 65% of sales taken via the web.

Having outperformed its main peers for so long, Sainsbury faces more of a challenge to maintain its growth, according to Coupe.

While the market has hailed this as good news, the U.K.'s No. 2 supermarket could be in for a challenging year. Toys and technology including Fitbits, mobile phones and computers all sold well.

Best-sellers included Taste the Difference party food and prosecco, while across Argos there was strong demand for the iPad mini, PlayStation 4 computer games consoles and Fitbits.

"Sainsbury's offered customers greater quality food, choice and value than ever before, across all channels. However, we are well placed to navigate the external environment and remain focused on delivering our strategy".

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