Sainsbury’s has reported a slowdown in sales after the soggy spring weather hit trading at its Argos business.
The UK’s second largest supermarket said it had seen strong food sales, but the wet weather hit demand for garden equipment and outdoor furniture at Argos.
Sales overall were up 3% in the 16 weeks to 22 June, Sainsbury’s said, but this was slower than in the previous quarter.
One analyst suggested the Argos business was an “albatross” around the supermarket’s neck.
Sainsbury’s saw food sales rise 4.8%, with Nectar offers and Aldi price matching helping to attract shoppers.
It also said its ‘Taste the Difference’ premium own brand range had seen sales jump by 14%.
However, sales of non-food items were down and Argos also saw trading decline. Along with the wet weather, the retailer said cost-of-living pressures meant shoppers were still cautious about spending on big ticket items.
Argos also saw weaker demand for consumer electronics, particularly in gaming.
Despite this, Sainsbury’s said the recent spell of hot weather had triggered a spike in sales of items such as fans and paddling pools.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said “the Argos albatross” around the neck of Sainsbury’s “can’t be ignored”.
“Electronics aren’t faring well in this economic climate, as people prioritise the essentials,” Ms Lund-Yates said.
“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.
“The additional exposure offsets and hides what has been a remarkable showing for the core grocery business.”
Separately, research from the British Retail Consortium (BRC) found that cheaper coffee, butter and TVs all helped to slow shop price rises to the lowest annual rate for almost three years last month.
Prices rose at an annual rate of 0.2% in June, the BRC said, with TVs being discounted ahead of the Euro 2024 tournament.
Inflation – the rate at which prices rise – has been falling steadily over the past year.
However, even though inflation is falling, it does not mean the prices of goods and services overall are coming down, just that they are rising at a slower pace.
While the BRC survey found shop price rises have slowed to the lowest rate since October 2021, many food items and other goods are still more expensive than they were before the pandemic and Russia’s invasion of Ukraine, leaving household budgets squeezed.
Researchers suggested that price rises will remain subdued amid tighter household spending.
Official figures showed that the UK’s headline inflation rate – which charts price rises across the whole economy – hit the Bank of England’s 2% target for the first time in almost three years in May.
But experts are warning of a bumpy road ahead.
The Bank of England has put up interest rates to try to dampen down consumer demand, meaning many face higher mortgage rates and rents.
The Middle East conflict also continues to affect trading in the Red Sea, a popular shipping route, forcing firms to take longer and more expensive diversions.
These higher logistics costs could be passed on to consumers, warned Mike Watson, head of retailer and business insight at NielsenIQ, which helped produce the BRC survey.
“The last few years should serve as a warning that where business costs rise significantly, consumer prices are forced up too,” he said.
