Must read: Sainsbury’s shares extend recovery after Q1 update

Sainsbury (J) (LSE:SBRY) reported first-quarter like-for-like sales growth excluding fuel of 2.1%, down from 3.1% in the previous period as the Middle East energy shock weighs on consumers’ propensity to spend. The supermarket said the impact of the conflict ‘remains uncertain’.

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However, essential groceries remained resilient, up 3.6%, thanks to the supermarket’s commitment to value with its Aldi Price Match and Your Nectar Prices proving very popular.

While consumers may be abandoning big ticket purchases in the current macro climate, they are still making room for the ‘little luxuries’, evidenced by strong Q1 sales growth of 6% in Sainsbury’s Taste the Difference premium own-label food range.

Similarly, fresh food outperformed as sales rose 5%, with record sales of berries thanks to the group’s additional focus on healthier choices. The Easter weekend and the May heatwave also supercharged sales of lamb and burgers.

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Discretionary general merchandise and clothing were areas of weakness in Q1, as Sainsbury’s struggles to make headway in a highly competitive part of the retail market at a time when consumers are making cutbacks. Argos remains a work in progress, with sales falling 0.5%, hit by weakness in core seasonal categories, partially offset by strong sales of fans in the heatwave and of TVs ahead of the World Cup.

On a more positive note, Sainsbury’s maintained its full-year guidance for underlying operating profit reaching between £975 million and £1.075 billion, and said it had an ‘encouraging start to the year’. The company also said it remains on track to deliver £1 billion of cost savings over the three years to March 2027.

Traders are responding optimistically to Sainsbury’s update with shares rallying this morning, landing the company towards the top of the intraday FTSE 100 leaderboard.

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After a challenging two months for the stock from mid-April onwards following disappointing full-year earnings and a major broker downgrade from ‘buy’ to ‘sell’ from Goldman Sachs, slashing its price target, there appear to be some green shoots of recovery coming back into play in recent weeks as the recent rebound looks to be gathering momentum.

While shares are little changed so far this year, the stock has rallied 7% since 19 June and remains higher by a respectable 15% over the past 12 months, a similar percentage increase to its long-standing rival Tesco (LSE:TSCO).