Sainsbury's sales up ahead of £1.3bn Argos deal
Sainsbury's, Britain's second biggest supermarket, reported its first quarterly sales increase in more than two years on Tuesday, three days before a deadline for it to raise its offer for Argos-owner Home Retail.
Sainsbury's is embroiled in a two-way battle for Argos with South African company Steinhoff International and both suitors have until 5pm on Friday to make a firm offer or walk away.
The UK supermarket made a cash and shares proposal for Home Retail in February worth £1.3bn (€1.65bn) but Steinhoff trumped that offer with a 175 pence per share proposal later in the month valuing it at £1.44bn.
Speaking to reporters on Tuesday, Sainsbury's chief executive Mike Coupe was tight-lipped about his next move, beyond reiterating that he will not overpay.
"It's by no means a must do deal. We've said there's a price and we won't go beyond that," he said.
Coupe dismissed the suggestion that a failure to land Argos would leave a major question mark over Sainsbury's strategy.
"You can see from the (fourth quarter) numbers that the business has moved forward well on a number of fronts," he said. "There's no reason why Sainsbury's wouldn't be a successful business in the future without Argos."
When it unveiled its takeover proposal on February 2, Sainsbury's said it wanted to buy Home Retail to accelerate its growth by creating the country's largest general merchandise retail business.
Sainsbury's said sales at stores open more than a year rose 0.1pc, excluding fuel, in the nine weeks to March 12, ahead of analyst forecasts in a range of unchanged to down 0.6pc and a third quarter fall of 0.4pc.
Sainsbury's, which has shown greater resilience to competition from German discounters Aldi and Lidl than its big four rivals - market leader Tesco, Asda and Morrisons - said it expected the market to remain competitive as food deflation continued to impact sales growth but was confident it would outperform its peers.
Last week, Home Retail reported improved trading at Argos and said its year-end cash balance would be some £100m above analyst forecasts - factors that will have to be taken into account in any raised offers from either Sainsbury's or Steinhoff.