Sainsbury’s won shoppers from all its major grocery rivals this Christmas but sales at its Argos chain dived, in a worrying sign for high street rivals.
The UK’s second-biggest supermarket reported an 8.6% rise in grocery sales in the six weeks to 6 January but Argos sales fell 4.2% in the same period as shoppers reined in spending on electrical goods and furniture.
Demand for energy-saving gadgets such as electric blankets and air fryers was down after a surge in 2022 when fears about bills were at a peak, while shoppers bought fewer expensive items such as furniture because of cost of living pressures.
Argos sales were strong over the Black Friday discount period in November but weakened in December when it was trading against a strong period a year earlier, when sales were helped by the Royal Mail strikes, which affected home deliveries by online specialists.
In another sign of a tough non-food market, Sainsbury’s clothing sales were down 6% in the run-up to Christmas as the company said there had been lots of discounting in the market amid “big chunks” of mild weather.
Simon Roberts, the chief executive of Sainsbury’s, credited the group’s Nectar loyalty scheme discounts and price matching with Aldi on key items, as well as product innovation, with helping the chain take market share from the discounters and all its traditional rivals.
Asda lost out the most to Sainsbury’s, followed by Tesco, Aldi and Morrisons, according to data from the market analysts Nielsen.
“It was our first purple Christmas,” Roberts said, referring to the colour of its loyalty card. Responding to criticism that the scheme’s discounts, such as Nectar Prices – which Roberts said could save £18 on an £80 shop – were counteracted by charging other shoppers more, he said: “The evidence speaks for itself. Customers really bought into Nectar Prices with 18 million users last year.”
Roberts said Sainsbury’s had increased the number of items sold because it had trimmed prices as inflation on food had eased, and claimed Sainsbury’s had increased the number of items sold faster than Aldi for the first time.
“We have come a long way on our value position and that is why we have so many more shoppers coming to us,” the chief executive said.
He said inflation on food would continue to ease but he did not expect deflation any time soon because – although some commodities had reduced in price – wage inflation would continue to mean higher costs on many items.
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Roberts said Sainsbury’s was working with the government to help reduce the impact of problems in the Red Sea caused by attacks by Houthi rebels on cargo ships. He said most shipments via the area were taking at least 10 days longer, as they could not go via the Suez Canal, and Sainsbury’s was carefully planning shipments to try to maintain availability and keep costs down.
The company, which before Christmas promised it would hit the top end of market expectations on annual profits, maintained that guidance on Wednesday. However, the poor performance at Argos and lack of an upgrade led to an almost 5% fall in Sainsbury’s share price on Wednesday morning.
Charlie Huggins at the investment firm Wealth Club, said: “Sainsbury’s cannot afford to rest on its laurels. The supermarket sector remains intensely competitive and the UK consumer is far from being out of the woods, with the weaker clothing and general merchandise sales pointing to an element of caution in consumer behaviour.”
