Consumers are expected to remain cautious in discretionary spending until further interest rate cuts are implemented, cautioned the CEO of Sainsbury’s, as the company reported a significant decline in Argos sales.
Sainsbury’s, the UK’s second largest supermarket chain, saw a 2.7 percent increase in like-for-like sales during the 16 weeks ending June 22, down from 9.8 percent in the same period last year. This marks a slowdown from the previous quarter’s 4.8 percent growth, influenced by easing food inflation, adverse weather conditions, and the ongoing cost of living challenges impacting consumer spending.
The overall performance was dragged down particularly by the Argos division, where sales dropped by 6.2 percent in the latest quarter following a 4.7 percent decline in the prior quarter. Despite a 25 percent boost in television sales during the Euros football tournament, Argos struggled due to a weaker demand for seasonal items like house and garden products and outdoor furniture, as well as reduced interest in consumer electronics such as gaming products.
Simon Roberts, CEO of Sainsbury’s, remarked, “Customers remain cautious, especially in discretionary spending areas, which is understandable given the financial pressures households are facing due to the cost of living crisis.” He expressed satisfaction with inflation stabilising but emphasised the need for interest rate cuts to bolster consumer confidence in non-essential purchases.
In February, Sainsbury’s outlined plans to strengthen its "food first" strategy while downsizing its clothing and general merchandise divisions by reducing store space. This restructuring aims to streamline operations and reduce costs by approximately £1 billion over the next three years as part of its broader "next level" strategy. Despite challenges in non-food sectors, Sainsbury’s continues to see robust growth in its food division, although the rate slowed to 4.8 percent from 7.3 percent in the previous quarter as inflation pressures eased across the market.
Roberts highlighted Sainsbury’s ongoing success in gaining market share within the grocery sector, outperforming competitors consistently over the past 15 months. With a current UK market share of 15.2 percent, Sainsbury’s remains second only to Tesco and continues to attract shoppers away from both discounters like Aldi and Lidl and premium retailers such as Marks & Spencer and Waitrose.
