Sainsbury’s sales growth slows as weather hits Argos and non-food ranges

Sainsbury’s has seen sales growth slow despite solid grocery trading and a boost from the Euro 2024 football tournament after a hit from poor early summer weather to its Argos and seasonal ranges.

The supermarket giant reported a 3% rise in underlying like-for-like sales in the 16 weeks to June 22, excluding fuel and stripping out the closure of its Argos business in Ireland.

Total grocery sales lifted 4.8% as the firm saw robust growth by volume in its first quarter, although this was the slowest seen for many quarters as food inflation has fallen back significantly and as it came up against soaring sales a year earlier.

The group said it saw a boost from the Euros, with sales of televisions surging by 25% year on year.

But this failed to prevent a hefty slide in total non-food sales, with Sainsbury’s revealing a 4.3% drop across general merchandise due to a blow from unseasonal early summer weather, while the Argos business saw a 6.2% slump due also to weaker demand for consumer electronics and gaming products.

Chief executive Simon Roberts said warmer recent weather has since helped provide a boost to non-food, with last week’s heatwave seeing the firm sell more fans than it has in the entire year so far, while sales of paddling pools also doubled.

It also cheered rising grocery sales by volume for its fifth quarter in a row, showing growth even as inflation has dropped back sharply.

Figures also out on Tuesday showed food inflation is now lower than at any time since 2021, at 2.5% in June down from 3.2% in May, according to the British Retail Consortium (BRC)-NielsenIQ Shop Price Index.

Sainsbury’s said its own grocery inflation is running slightly below the wider market, but flagged cost pressure from surging wage bills.

The group said it is sticking to its guidance for underlying retail operating profits of between £1.01 billion and £1.06 billion for the full year, which would be growth of 5%-10%, but shares still fell 3% in Tuesday morning trading.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said that, while sales growth is expected to slow, the “Argos albatross around its neck can’t be ignored”.

She said: “As inflation cools, the weather worsens and tough comparisons crop up on the course, eking out the amount of growth seen last year was always a difficult ask.

“But there is a lingering Sainsbury’s specific issue in its ownership of Argos.

“Electronics aren’t faring well in this economic climate, as people prioritise the essentials.

“General merchandise is the most cyclical area of the supermarket economy to be in, so being overweight in this arena really slows you down when times get tough.”

Mr Roberts insisted “there’s everything to play for” for a turnaround in Argos and general merchandise trading.

“With a better summer and hopefully some interest rate cuts to come, it will give consumers some confidence,” he said.

He added that the election will help give households and businesses more certainty.

“Depending on the result, lots of people are looking for certainty and clarity on what’s going to happen next,” he said.

Overall, he said the group is “pleased with our market-beating grocery performance”.

“We’ve been winning from competitors every month for 15 months, as more and more people are choosing Sainsbury’s for their big weekly shop.”

Mr Roberts said the group is also “gearing up for Wimbledon this week and England’s quarter-final match on Saturday night”.