Wednesday 28 September 2016 7:43 am

Sales drop at Sainsbury's in second quarter - but Argos is growing

Sainsbury's reported at drop in sales during the 16 weeks to 24 September, despite transaction growth and flat fuel sales – but Argos posted a strong performance for its second quarter.

The company's share price had fallen by 3.03 per cent in mid-morning trading.

The supermarket posted a 1.1 per cent decline in like-for-like sales, excluding fuel, "driven by food price deflation", but said like-for-like transactions grew across all channels. 

"This shows that customers are consistently choosing Sainsbury's for the choice, quality, value and customer service we offer," said Sainsbury's boss Mike Coupe.

Meanwhile, Argos, which Sainsbury's recently took over with its acquisition of Home Retail Group, reported a 2.3 per cent increase in like-for-like sales for its second quarter to 27 August.

Sainsbury's is planning to open 20 new Argos outlets within its supermarkets by Christmas this year.

Read more: Sainsbury’s move to eat rivals’ lunches could turn sour

Looking ahead, Coupe said he expects the market to remain competitive, and added that the effect of recent devaluation of sterling "remains unclear".

"However, Sainsbury's is well positioned to navigate the changing marketplace and we are confident that our strategy will enable us to continue to outperform our major peers," he said.

Retail Remedy partner Phil Dorrell warned that the retailer is facing fierce competition.

"Sainsbury's is facing a resurgent Tesco and Morrisons. In the next 12 months Asda will also start to regain its footing, and Aldi are in fighting talk, standing by their pledge to be the lowest priced grocer," he said.

"Quite simply, Sainsbury's footfall is falling short."