Sainsbury's reported a deceleration in sales growth in recent weeks, attributed to a combination of easing food inflation and more cautious consumer spending habits influenced by the ongoing cost of living crisis and unfavorable weather conditions. Like-for-like sales, excluding fuel and the impact of Irish Argos store closures, rose by 3% in the three months to June 22, a notable decrease from the 4.8% growth observed in the preceding quarter. Food sales growth also reduced to 4.8% from 7.3%, despite consumers purchasing more food items than the previous year.
The non-food sector, particularly Argos, experienced significant declines. Argos sales plummeted by 6.2% in the quarter, a worsening from the 4.7% drop in the prior three months. This decline occurred despite a 25% increase in TV sales, driven by the Euro 2024 football tournament. The unseasonal start to summer negatively impacted sales of seasonal items like paddling pools and garden furniture, which had performed well in the hot summer of the previous year. Electronics sales, including games, were generally weaker due to softer demand in a challenging trading environment.
Sainsbury's CEO Simon Roberts noted that consumer caution is expected to persist until interest rates are cut, affecting discretionary spending. Analysts like Sophie Lund-Yates from Hargreaves Lansdown pointed to the cooling inflation, poor weather, and tough comparisons from the previous year as reasons for the slowed growth. William Woods from Bernstein highlighted that weak clothing performance was anticipated given the unfavorable UK weather. Despite these challenges, Sainsbury's online offering saw particular success, with 14% of sales coming from this channel and an 80% surge in rapid delivery demand. Roberts expressed hope that an improvement in weather would lead to pent-up demand for summer items.
