Sainsbury’s Christmas sales fall as Argos struggles with ‘cautious consumers’

Worst performing of the UK’s Big Four grocers records 1.1 per cent sales fall in crucial festive period

Grocery sales rose 0.4 per cent from the same period last year, even as food price inflation rose to 1.8 per cent (Sainsbury’s)

Sainsbury’s Christmas sales were worse than expected, with Argos performing particularly poorly as it held off from heavy discounting over the Black Friday weekend.

Britain’s second largest supermarket chain bought Argos in September 2016 to decrease its dependence on food sales. But general merchandise sales, which include Argos, dropped 2.3 per cent in the 15 weeks to 5 January while clothing sales fell 0.2 per cent.

Sainsbury’s, which is preparing a £12bn takeover of Asda, said sales had been dented by cautious consumers during the important festive period. Boss Mike Coupe said Christmas “came late” as shoppers held off until the final weeks, while he also warned over an “uncertain” consumer outlook.

Like-for-like sales, excluding fuel, fell 1.1 per cent – below analysts’ average forecast of a 0.2 per cent fall.

Grocery sales rose 0.4 per cent from the same period last year, even as food price inflation rose to 1.8 per cent, meaning that in real terms Sainsbury’s is going backwards.

The company blamed falling sales on Argos’s decision not to slash prices as much as competitors over the Black Friday weekend, but that attempt at positive spin failed to impress some analysts.

“It’s the direction of travel that’s most worrying for Sainsbury’s,” said Tom Stevenson, investment director at Fidelity Personal Investing.

“Sales growth is deteriorating quarter by quarter as the market becomes ever more ‘promotional’, to use chief executive Mike Coupe’s euphemism.”

Mr Coupe said clothing had “performed well, with strong full-price sales growth in a tough market”.

“Retail markets are highly competitive and very promotional, and the consumer outlook continues to be uncertain,” he added.

Sainsbury’s results compare unfavourably to its Big Four rival Morrisons which grew sales 3.6 per cent in the pre-Christmas period. Tesco and Marks and Spencer are due to update the stock market on their progress later this week.

Sainsbury’s has been among the hardest hit by a trend for shoppers increasingly looking for bargains.

Data published by Kantar Worldpanel on Tuesday suggested Sainsbury’s was the worst performing of the Big Four supermarkets with its market share dropping from 16.5 per cent to 16.2 per cent in the run-up to Christmas.

Meanwhile, two-thirds of households visited Aldi or Lidl in the 12 weeks to 30 December as the pair took a combined 12.8 per cent share of the UK grocery market Aldi’s sales jumped 10.4 per cent and Lidl’s 9.4 per cent during the period.