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Sainsbury’s has blamed “significant headwinds” from weak consumer confidence, heavy online competition and widespread discounting for a fall in sales at its Argos chain over the all-important Christmas quarter.
The UK’s second-largest grocer said its supermarkets increased sales by 3.4% at established stores in the three months to 3 January but Argos sales fell 1% in the period.
Argos, which has more than 800 stores, performed particularly badly in the crucial final six weeks, with total sales down 2.2% compared with the Sainsbury’s chain’s 4.6% increase.
The company said it had sold more items at Argos but the average price of products across the market had fallen amid “subdued spending on higher ticket items such as furniture, heavy promotional activity and a weak gaming market”.
It said it had faced “significant headwinds from online traffic trends, a tough and promotional general merchandise market and weak consumer confidence”.
Online competition, amid the continued rise of cut-price online sellers such as Temu and Shein, is understood to have increased and put significant pressure on traditional retailers this Christmas.
The poor performance at Argos is likely to fuel speculation that Sainsbury’s will aim to offload the catalogue shop, which was the target of an approach from the Chinese group JD.com in the autumn.
Simon Roberts, the chief executive of the group, said a strong performance at its supermarkets meant it was still on track to achieve profit expectations. He said the group expected to return more than £800m of cash to shareholders this year, including a £250m special dividend.
He said: “We have made balanced choices to invest and sustain the strength of our competitive position through the most important trading period of the year.
“These investments in value, quality and service have delivered further strong grocery trading momentum and market share gains and, despite weaker general merchandise market conditions, we continue to expect to deliver retail underlying operating profit of more than £1bn.”
Online sales of groceries increased 14% in the quarter, helped by a rise in demand for rapid delivery.
In contrast, Sainsbury’s said its clothing sales had been affected by “softer demand and milder weather”, building on fears for the wider fashion market over the period.
Sainsbury’s shares fell more than 4% in London on Friday, to value the company at just over £7bn.
Marks & Spencer on Thursday said its clothing sales had fallen in the run-up to Christmas when food sales soared.
Tesco, the UK’s biggest supermarket chain, said that it was aiming to grab an even bigger slice of the grocery market this year after winning its best share in more than a decade over Christmas with strong sales of fresh food and its Finest own-label range.
