Sainsbury's has delivered a robust performance in its grocery division over the crucial festive period, though its general merchandise and Argos businesses continued to face significant headwinds.
Festive Grocery Performance Shines
The UK's second-largest supermarket chain reported a 5.1% increase in total grocery sales over the six weeks to 3 January. This growth was significantly bolstered by strong demand for its premium 'Taste the Difference' range, sales of which surged by 15% in the Christmas quarter.
Chief Executive Simon Roberts stated the retailer had "won grocery market share for the sixth consecutive Christmas", attributing success to strategic investments in value, quality, and customer service during a highly competitive season.
Argos and Non-Food Drag on Results
In stark contrast to the grocery success, the picture was less cheerful for the group's other divisions. Sales at Argos fell by 2.2% during the same six-week period, while Sainsbury's overall non-food and clothing sales declined by 1%.
Roberts cited a "subdued" consumer appetite for higher-ticket items like furniture, intense promotional activity, and a weak gaming market as key factors. He also pointed to increased competition from online discount giants Shein and Temu as an added challenge for general merchandise.
The mixed performance led to a 6% drop in Sainsbury's share price on Friday 9 January, as the broader third-quarter growth of 3.4% (for the 16 weeks to 3 January) also fell short of market expectations.
Market Context and Future Outlook
The update follows rival Tesco's own festive results, which showed a 3.3% rise in like-for-like sales, a figure that also missed forecasts. Tesco's CEO Ken Murphy described the pre-Christmas market as "intense" and "relentless", with shoppers prioritising value.
This trend was evident in the performance of discounters Aldi and Lidl, which reported total sales growth of 3% and 10% respectively in the four weeks leading to Christmas Day.
Despite the challenges, Sainsbury's reaffirmed its recently upgraded full-year guidance, expecting to deliver retail earnings of more than £1 billion. Roberts offered a note of optimism on inflation, suggesting food price rises have passed their peak and greater stability is expected in the year ahead.
The ongoing struggles at Argos have, however, reignited speculation about its future within the group. Chris Beauchamp, chief market analyst at IG, commented that Sainsbury's had "essentially hung up the 'for sale' sign over Argos", referencing a previous approach from Chinese firm JD.com. Roberts declined to comment on potential sale talks, focusing instead on the existing turnaround plan for the business.
