Sainsbury's, Britain's second biggest supermarket, beat forecasts for underlying sales in its Christmas quarter and said it was well placed to deal with the pressures it faces this year.
Sainsbury's joins the UK's fourth biggest supermarket Morrisons in reporting better than expected Christmas trading.
UK market leader Tesco is also forecast to have done well.
Sainsbury's last year bought Argos-owner Home Retail to improve its online logistics and general merchandise range.
It said sales at stores open over a year rose 0.1%, excluding fuel, in the 15 weeks to January 7, the third quarter of the company's financial year.
Although only a modest increase, that was ahead of analysts' average forecast of a fall of 0.8% and a second quarter decline of 1.1%.
"The market remains very competitive and the impact of the devaluation of sterling remains uncertain," said chief executive Mike Coupe.
"However, we are well placed to navigate the external environment and remain focused on delivering our strategy," he added.
Tesco and Morrisons are both in turnaround mode after going through a disastrous period where they lost market share. Sainsbury's market share has been broadly stable over the last five years.
Some investors have expressed concern the Argos takeover unwisely increases Sainsbury's exposure to higher import costs given the depreciation of sterling since June's Brexit vote but the group said Argos had traded well, with like-for-like sales up 4%.
Sainsbury's highlighted strong performances from its online and convenience operations over the Christmas quarter with sales up over 9% and 6% respectively.
Sales of clothing and general merchandise were also up 10% and 3%.
Before today's update analysts were on average forecasting a pretax profit for 2016-17 of £573m.