(qlmbusinessnews.com Wed. 3rd July, 2024) London, UK —

Sainsbury's Faces Sales Slowdown as Wet Weather Dampens Argos Performance.

Sainsbury‘s, the UK's second-largest supermarket, has reported a deceleration in sales growth, largely attributed to the damp spring weather affecting its Argos division. While food sales remained robust, demand for garden equipment and outdoor furniture at Argos suffered due to the inclement weather.

Cost of living pressures further impacted non-food sales, with Sainsbury's CEO Simon Roberts noting that consumer caution is expected to persist until interest rates begin to decrease. An analyst suggested that the Argos segment is becoming a burden for the supermarket chain.

Overall sales increased by 3% in the 16 weeks leading up to 22 June, marking a slowdown from the previous quarter. Food sales saw a 4.8% rise, bolstered by Nectar offers and price matching with Aldi, which helped attract shoppers. The ‘Taste the Difference' premium own-brand range also experienced a 14% surge in sales.

However, non-food sales declined, with Argos witnessing a 6.2% drop. Alongside the wet weather, cost-of-living pressures led to continued consumer caution regarding big-ticket purchases. Argos also reported decreased demand for consumer electronics, particularly gaming products.

Sainsbury's

Mr Roberts highlighted that consumer caution is unsurprising given the ongoing financial pressures on households, and he does not foresee a change until there are consecutive cuts in interest rates. He also pointed out that weather significantly influences consumer spending patterns, with the recent hot spell boosting sales of items like fans and paddling pools.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, described Argos as an “albatross” for Sainsbury's, noting that electronics are struggling in the current economic climate as consumers prioritise essentials. She commented that the general merchandise sector is highly cyclical, and Sainsbury's heavy involvement in this area hinders its performance during tough times, overshadowing the strong performance of its core grocery business.

Russ Mould, investment director at AJ Bell, likened Sainsbury's situation to the England football team, stating that while the supermarket achieves successes, it has the potential to perform much better. He pointed out that non-food operations have long been a drag on the company, distracting management from capitalising further on the strengths in their food division.

In separate research, the British Retail Consortium (BRC) reported that the price of items such as coffee, butter, and TVs helped slow shop price rises to the lowest annual rate in almost three years in June. Prices increased at an annual rate of 0.2%, with TV discounts ahead of the Euro 2024 tournament playing a significant role.

While inflation has been steadily falling over the past year, this does not mean prices are decreasing, but rather that they are rising at a slower pace. Despite the slowing rate of shop price rises, many food items and other goods remain more expensive than before the pandemic and Russia's invasion of Ukraine, continuing to strain household budgets.

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