Sainsbury’s shares fell on Friday after releasing its festive trading update, with total retail sales (excluding fuel) rising 3.9% in the third quarter and 3.3% over the crucial six-week Christmas period.
But poor performance at Argos overshadowed robust food sales, sending shares down by over 4% at the time of writing on Friday.
Like-for-like sales grew 3.4%, driven by strong grocery performance, which increased 5.4% in the quarter and 5.1% over Christmas. The supermarket giant sold 20% more turkeys than last year as customers chose Sainsbury’s for their main Christmas shop, with Nectar loyalty scheme participants saving an average of £27 on their festive purchases.
Food sales proved the standout performer. Fresh food sales surged 8%, whilst premium own-label range Taste the Difference grew 15%, making it the fastest-growing premium own brand in the market.
The grocer launched over 260 new Taste the Difference products during the quarter, with party food items and festive desserts proving particularly popular. Groceries online sales jumped 14%, boosted by strong growth in on-demand delivery and improved availability.
However, while food sales were strong, Sainsbury’s was dragged down by its Argos business unit. Argos sales fell 1% in the quarter and 2.2% over Christmas, reflecting weak consumer confidence and subdued spending on higher-ticket items such as furniture.
“Keep in mind that Sainsbury’s is more exposed to general merchandise than its peers, owing to its ownership of Argos,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown
“General merchandise is the most cyclical area of the supermarket economy to be in, so being overweight in this arena can really slow sales down when things get tough. Recent initiatives are helping to drive higher sales volumes at Argos, but consumers remain cautious and are steering clear of big-ticket items.”