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J Sainsbury plc Dips Despite “Best Ever” Christmas

Shares in Sainsbury’s (LSE: SBRY) (NASDAQOTH: JSAIY.US) stumbled by more than 2% in early trade this morning, following the release of its third-quarter trading statement for the 14 weeks to 4 January 2014.

Despite revealing that total sales increased by 2.5%, investors seemed wary of chief executive Justin King’s description of “a very tough sales environment” in October and November, with like-for-like sales remaining flat against its comparative period last year.

Sainsbury’s has been on a strong run over the last few years, though shareholders will always be on the lookout for any signs of slowing growth or weakening competitive advantage. With main rival Tesco having suffered in recent times, its turnaround is beginning to take shape, while Marks & Spencer may not be faring so well with its clothing sales but its food division is going from strength to strength.

However, Sainsbury’s good form doesn’t look to be over just yet. Mr King described the festive period as the company’s “best Christmas ever”, with the seven days prior to Christmas its busiest ever trading week with more than 28 million transactions.

Widely recognised as crucial to a supermarket’s success (as Morrisons has seen, to its detriment), smaller convenience stores helped Sainsbury’s customers to “top up their main supermarket shop”, with that part of its business growing by nearly 18% in the third quarter.

Online sales — another area where Morrisons is playing catch-up — lifted by over 10% in the period, with a new groceries online website contributing to the growth.

Looking ahead, though, CEO King remained cautious, as he commented: “As with last year, we expect customers to spend cautiously in the few months following Christmas, in an attempt to rebalance the household finances.”

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> Sam does not own shares in any company mentioned. The Motley Fool owns shares in Tesco and has recommended shares in Morrisons.