As many childhoods can attest, the difference between Christmas expectations and festive reality can be an almighty chasm – and so it proved for supermarket investors this week, who were left underwhelmed when the major players unwrapped their Christmas results.

First up was Sainsbury’s, which undershot heightened expectations, despite posting record Christmas sales thanks to its Nectar Prices promotions and shoppers trading up to its premium Taste the Difference range.

Grocery sales in the six weeks to 6 January 2024 increased 8.6% as volume growth offset lower inflation than the same time last year. However, the strong food performance was weighed down by weaker trading at Argos, which registered a 4.2% decline in sales, while clothing sales fell 6%.

Sainsbury’s shares fell 6.3% on Wednesday to close at 286.5p, as the City reacted to the weaker-than-expected non-food sales and lack of profits upgrade on its strong grocery numbers.

“Sainsbury’s has a ‘food first’ strategy and the big question from its Christmas trading update is whether management is guilty of neglecting the other parts of the group,” AJ Bell said.

“One has to question if the Argos brand is still the right fit for the grocery seller over the long term. If food is the priority, would the shop floor space currently occupied by Argos concessions be put to better use?””

Similarly, M&S shares were in the red on Thursday, despite it posting the strongest festive grocery growth among the full assortment of supermarkets. Its food sales were up 10.5% in the 13 weeks to 30 December to £2.33bn, representing like-for-like growth of 9.9%. Total UK sales were up 8.5% to £3.57bn as clothing & home grew more slowly at 4.8% in the period.

Yet M&S shares dropped 4.3% to 265.9p to undo some of its recent rally, as it was also punished for holding profit guidance given the headwinds in non-food.

Shore Capital commented: “After a quite remarkable 2023 with two especially material upgrades to earnings, we sense M&S is arriving at a point where more normalised expansion and sequential earnings and dividend growth can be expected… That said, if Mr Machin can expedite his plans for modernisation at pace there should still be plenty of upside in the journey.”

One supermarket that did increase earnings expectations was Tesco, which raised retail adjusted operating profit to £2.75bn, above its previous guidance range of £2.6bn to £2.7bn after “strong than expected” sales.

Tesco’s UK & Ireland sales growth for the 19 weeks to 6 January was 6.9%, though growth slowed marginally from 7.3% in the 13 weeks to 25 November to 6.4% in the 6 weeks to 6 January.

Hargreaves Lansdown said: “Tesco has managed what Sainsburys couldn’t quite muster, which is a profit upgrade for the full year… The tills were chiming away over Christmas, and the slightly conservative previous estimates, coupled with lower exposure to general merchandise, means there’s room for expectations to be inflated.”

Tesco shares were marginally up in morning trading, but settled back to 0.6% down at 294.6p by Thursday lunchtime.