Argos has emerged as the unexpected hero of Sainsbury’s Christmas results. Making the announcement this morning, even Sainsbury’s CEO Simon Roberts seemed surprised by its performance.
“For Argos to have received more sales in the Christmas week than Black Friday is extraordinary,” he told investors, hailing the result as a “real call out” in a record Christmas period for the grocer.
Indeed, Argos’s year-on-year sales were up 7.1% in the six weeks to Christmas 2022, and 4.5% for the third quarter overall.
Granted, these figures come against a poor period in the third quarter of 2021, when Argos sales fell 16% – largely due to industry-wide supply chain issues.
But the growth isn’t just about a positive comparison – it’s also testament to the success of its long-standing strategy. Since its 2016 acquisition of Argos, Sainsbury’s has been working hard to turn it into a more convenient, digital-first business.
Hundreds of standalone stores have closed in favour of a growing network of click & collect points and Argos concessions in Sainsbury’s stores.
The business has also invested heavily in local distribution centres – it opened five in 2021 – and worked on relationships with suppliers to improve availability and speed up delivery times.
That focus on reliability and store collection put Argos in prime position to pick up Christmas trade from delivery-focused rivals, who suffered the fallout from Royal Mail strikes.
As Roberts put it, the Argos model catered to the large number of customers “looking for certainty”. The store collection model had other benefits, too – it drove up footfall to Sainsbury’s stores, and no doubt helped fuel some additional food sales. Plus, these customers could avoid delivery fees – a growing consideration as the cost of living crisis mounts.
Some of the factors that worked in the favour of Argos will be limited to that pre-Christmas period. The Christmas World Cup, for example, increased sales of TVs. And the initial shock of rising energy costs drove an increase in purchases of energy-maximising electronics like air fryers and heated laundry rails.
Against that backdrop, Roberts remains understandably cautious about how Argos will fare in the year ahead, highlighting the continued pressure on discretionary spend.
But in terms of delivery disruption, we’re certainly not out of the woods yet. Most notably, Amazon is still facing some worker walkouts and slowdowns.
So, as we enter one of the sector’s most challenging years to date, Argos may well continue to deliver. And that can only be of benefit to Sainsbury’s as competition for grocery spend heightens.
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