Argos slump hits Sainsbury’s festive cheer
Falling demand for heating products and clothing leads to 6pc drop in sales for supermarket giant
SAINSBURY’S Christmas boost has been cancelled out by falling sales of clothing and electronics at Argos.
Shares in Britain’s second biggest supermarket dropped more than 6pc to the bottom of the FTSE 100 yesterday after it reported a 4.2pc drop in sales at Argos in the six weeks to Jan 6.
The catalogue retailer suffered as customers cut back on expensive items such as TVS. Sainsbury’s chief executive Simon Roberts said easing energy prices had also led to a fall in demand for heating products. Elsewhere, sales of its clothing line Tu dropped by 6pc.
Mr Roberts said sales in these categories “dramatically rose” over the same period a year earlier as the energy crisis prompted high demand for “things like electric blankets, jumpers, and things like air fryers [for] cooking food more efficiently with less energy required”.
Sales suffered this year as falling energy prices meant demand for these items subsided. The retailer also closed its Irish Argos stores last year.
Investors focused on the slump in electronic and clothing sales even as grocery sales at Sainsbury’s rose by 8.6pc over Christmas.
Sainsbury’s share price had risen by nearly 20pc during the final three months of 2023 and analysts at Jefferies said the sharp sell-off yesterday may have been a “travel-and-arrive pullback”, suggesting investors who had been betting on a sales boost were now exiting the stock after it materialised.
The supermarket posted record sales of sparkling wine, mince pies and pigs in blankets over Christmas. Sales of Taste the Difference food products rose 13pc over the festive season.
Mr Roberts said: “We enter 2024 with strong momentum and next month we will share our updated strategy, building on all we’ve done to put food back at the heart of Sainsbury’s over the last three years.”
Sainsbury’s rolled out a new Nectar Prices offer last year, providing steep discounts for shoppers who signed up to its loyalty scheme – 3m new customers signed up to the scheme last year, bringing its membership to 18m.
Mr Roberts called the revamped Nectar scheme “a real game changer” and claimed members saved an average of £16 over Christmas.
Sainsbury’s, along with other traditional supermarkets, has been locked in a battle for customers with Aldi and Lidl after the German discounters gained momentum during the cost of living crisis. Sainsbury’s matches Aldi’s prices on hundreds of items and recently expanded the number of products it covers.
Sainsbury’s increased its market share in December from 15.6pc to 15.8pc, according to recent Kantar data.
While the loyalty offer has helped Sainsbury’s win customers, it has proved controversial.
The Competition and Markets Authority has announced an investigation into how grocers are using loyalty card prices, amid concerns that the
‘Next month we will share our updated strategy, building on all we’ve done to put food back at the heart of Sainsbury’s’
schemes are making it harder for people to shop around for the best prices.
Aldi’s UK boss Giles Hurley told The Telegraph recently that shoppers wanted “clear, transparent prices so they know how much they’re spending long before they get to the till”.
Sainsbury’s has previously said: “Our promotional rules around Nectar Prices are informed by the guidance from Trading Standards.”
Nectar Prices are currently only available at Sainsbury’s larger supermarkets. Mr Roberts declined to say whether the scheme would be expanded to Sainsbury’s Local stores.
He said: “Supermarkets and grocery online, where those bigger baskets go through particularly, is where it works.”
Last month, Mr Roberts told The Telegraph that traditional supermarkets were seeing a boost as people returned to offices. He said people were seeking out shops where they could buy all their groceries in one place, rather than hunting out bargains across multiple stores.