Poor sales of toys and video games dented Argos’s performance over Christmas as the chain’s owner, Sainsbury’s, said nervous shoppers were holding on to their cash.
Sales of general merchandise at the group slid nearly 4% in the 15 weeks to 4 January.
Argos also lost market share in toys as it ditched its traditional festive three-for-two promotion. The UK toy market slumped by 10% and gaming by more than 30%, Sainsbury’s said.
The retailer said sales of electronic gadgets were strong and it had achieved another record Black Friday trading period in late November before a lull shortly before Christmas.
Mike Coupe, the chief executive of Sainsbury’s, said: “Customers do have more money in their pockets year on year but they are choosing to be very careful in the way they spend that. We expect the food business to continue to be challenged.”
The poor performance at Argos offset resilient trading at Sainsbury’s, where grocery sales rose by 0.4% in the period and clothing sales rose by 4.4%, partly due to the chilly November. Trading at the group’s established stores slid by 0.7%, outshining a 1.7% fall reported on Tuesday by Morrisons for a similar period.
Coupe said Sainsbury’s had outperformed rivals because it had reduced prices on its budget items and improved its premium Taste the Difference range. The company was also bolstered by a 5% rise in online sales, which account for a fifth of trade.
The retailer did not see any change in shopping habits after the election in December, despite hopes of a so-called Boris bounce for retailers.
Coupe said shoppers were being careful with their money as they waited for more clarity on the wider political and economic outlook.
“Around or after the election there was no sign of change in terms of trading … there is nothing on the horizon that looks like it is going to change what’s been a challenging consumer environment,” he said.
The only possible catalyst for change in the near future might be the budget, set for 11 March, Coupe said.
The grocery market recorded the slowest Christmas sales growth in at least four years and all of the big four chains lost sales, according to the industry analysts Kantar.
Tesco, the UK’s biggest supermarket group, is expected to report its Christmas trading performance on Thursday – but Kantar’s data suggests the retailer was outgunned by Sainsbury’s.
The industry’s traditional players are under pressure from Aldi and Lidl, which increased their market share and achieved dramatic sales growth, partly driven by new store openings.
Boots data indicated the health and beauty chain was also under pressure from the German-owned discounters as well as B&M, Home Bargains and Select.
Walgreens Boots Alliance, the US-listed conglomerate owner of the British chain, announced a 2.7% fall in underlying sales at its international business, mainly due to poor sales at Boots.
Gross profits slid 3.7% reflecting lower sales at margins at the group, which closed 200 of its nearly 2,500 stores last year.