LONDON, Jan 10 (Reuters) - Sainsbury's, Britain's No. 2 supermarket group, reported a slight beat to forecasts for Christmas sales and said it was edging up its full-year profit guidance, thanks to better-than-expected synergies from the Argos business.
The group, which bought electricals and toys retailer Argos in 2016, also warned on Wednesday that market conditions remained challenging and it was cautious about the consumer environment in the year ahead.
Britons are facing pressure from slow wage growth and the jump in inflation that followed the 2016 Brexit vote.
Sainsbury's said total retail like-for-like sales, excluding fuel, rose 1.1 percent in the 15 weeks to Jan. 6, its fiscal third quarter - ahead of analysts' average forecast of 0.9 percent and growth of 0.6 percent in the previous quarter.
Total grocery sales grew 2.3 percent with groceries online and convenience store sales up 8.2 percent and 7.3 percent respectively. Online accounted for 20 percent of the group's sales during the quarter.
However, total general merchandise sales fell 1.4 percent. Sainsbury's said it won market share in general merchandise and clothing despite "challenging conditions."
Sainsbury's said it now expected to achieve 80-85 million pounds ($108-115 million) of earnings synergies from Argos by March 2018, ahead of previous guidance of 65 million pounds.
As a consequence underlying pretax profit for the full 2017-18 year would be moderately ahead of the published analysts' consensus - an underlying pretax profit of 559 million pounds ($755.77 million), down from 581 million in 2016-17.
Shares in Sainsbury's, up 3 percent so far this year, closed Tuesday at 248.4 million pounds, valuing the business at 5.5 billion pounds.
On Tuesday Britain's fourth biggest supermarket chain Morrisons beat Christmas sales growth forecasts while industry data indicated market leader Tesco outperformed its listed rivals during the festive quarter. ($1 = 0.7396 pounds) (Reporting by James Davey; editing by Kate Holton and Paul Sandle)