J Sainsbury (LSE:SBRY) shares climbed 2.5% to 323.8p, after reporting total retail sales excluding fuel up 4.2% in the first quarter of its 2026/27 year.
Like-for-like sales excluding fuel rose 3.8% over the 16 weeks to 20 June, with fresh food outpacing the wider market and grocery online continuing to accelerate.
General merchandise and clothing dragged in the opposite direction: Tu Clothing fell 2.1% against tough prior-year comparatives, while Sainsbury's general merchandise dropped 6.3%, partly by design as the retailer deliberately reduces non-food floor space in favour of food ranges.
Argos volumes grew 2.2% but average selling prices fell, leaving total Argos sales down 0.5% as consumers shifted toward lower-ticket items.
Full-year guidance was reiterated without change: total underlying operating profit of between £975 million and £1,075 million, with retail free cash flow above £500 million.
"We have had an encouraging start to the year but the impact of the conflict in the Middle East on our customers and our business remains uncertain," said chief executive Simon Roberts.
Sainsbury's interim results for 2026/27 are scheduled for 22 October.
Tougher times ahead says analyst
It was a resilient first quarter but faces a tougher period ahead, according to Mark Crouch, market analyst at eToro, who commenting on the UK supermarket's trading update said weakness in general merchandise and clothing reflects a deliberate strategic tilt toward food rather than any genuine deterioration in consumer demand.
This, he added, is a distinction that's important when reading into the underlying health of the business.
Crouch noted that management's decision to hold full-year profit guidance in place signals trading remains on track, though the analyst reckons the combination of economic uncertainty and the potential impact of higher energy prices removes any obvious incentive to raise expectations at this stage.
"Uncertainty over the economic outlook and the potential impact of higher energy prices means management has little incentive to upgrade expectations at this stage," Crouch said.
Argos is the standout concern
Hargreaves Lansdown equity analyst Aarin Chiekrie, at the investment platform, pointed to promotional activity as a key driver in Sainsbury's competitive performance.
Specifically, Chiekrie noted a focus on value through Nectar prices and an expanded ALDI Price Match programme as a factor in the growth in grocery sales, which outpaced the broader market and pulled in more customers.
But, the analyst added that the standout concern is Argos, where general merchandise weakness has worsened over the quarter; Chiekrie flags that higher-for-longer oil prices remain a risk that could stoke inflation and squeeze demand for the more discretionary products Sainsbury's sells through that channel.
