Combining Argos and Sainsbury’s trading data for the first time, Sainsbury’s first quarter update shows like-for-like sales grew by 2.3% (excluding fuel) in the sixteen weeks to 1st July.
Transaction growth was up 1.9% at Sainsbury, with a 3.0% rise in grocery sales.
Online sales at Argos rose 10%, with a 36% rise in Argos Fast Track delivery and a 64% rise in collection, helped by customer activity during the hot weather, as fans and paddling pools became the order of the day.
There are now 75 Argos Digital stores in Sainsbury’s supermarkets and the plan is to have 175 by the end of the financial year.
The shares rose 1.5% in early morning trading.
Laith Khalaf, Senior Analyst, Hargreaves Lansdown:
‘The recent heatwave helped to boost sales at Sainsbury’s group, as customers turned to the Argos website to buy electric fans and paddling pools to keep cool in the hot weather. Sales also rose at the supermarket checkouts, though with the cost of food imports rising because of weaker sterling, it remains to be seen how much of this will feed through into profits.
The bigger picture is still a challenging one for the UK supermarkets. Weaker sterling is pushing up food prices and putting a dent in consumers’ purses, while the trading environment remains as competitive as ever.
Indeed the turf war the big supermarkets have been fighting against the discounters may start to look like a schoolyard skirmish if Amazon decides it wants a piece of the UK grocery market. The Amazon Fresh service is already being trialled in the UK, and the online retailer’s recent purchase of Whole Foods sent shock waves through the sector.
Little wonder then that the big UK supermarkets are turning to new areas to try to eke out a living. Sainsbury’s purchase of Argos looks to be delivering results, and the supermarket is reportedly in talks to buy the convenience chain NISA to try to broaden its footprint, no doubt at least in part a response to Tesco’s proposed takeover of Booker and its network of franchised convenience stores.
While all this recovery, refocusing and reinvention goes on, investors have to accept there’s still a lot of uncertainty in the UK supermarket sector.’