Sainsbury’s has reported a slowdown in sales growth in its opening quarter as retail performance through its Argos business declined by 6.2%.

Like-for-like sales excluding fuel at the supermarket still climbed by 3% in the three months to 22 June although this was down from 4.8% growth in the previous quarter, and from 10% growth in the group’s Q1 results a year ago.

The 6.2% fall in Argos sales followed a 4.7% decline last quarter as Sainsbury’s acknowledged “tough” market conditions in which consumers were shopping “more cautiously”.

Sainsbury’s still posted a 4.8% growth in its food business which the supermarket’s chief executive, Simon Roberts, labelled a “market-beating grocery performance”. The supermarket’s volume growth has remained strong as inflation has slowed, despite being affected by what it described as “tough weather comparatives” in recent weeks.

“As inflation cools, the weather worsens and tough comparisons crop up on the course, eking out the amount of growth seen last year was always a difficult ask,” lead equity analyst at Hargreaves Lansdown, Sophie Lund-Yates, commented. “But there is a lingering Sainsbury’s specific issue in its ownership of Argos. Electronics aren’t faring well in this economic climate, as people prioritise the essentials.

“General merchandise is the most cyclical area of the supermarket economy to be in, so being overweight in this arena really slows you down when times get tough. The additional exposure offsets and hides what has been a remarkable showing for the core grocery business.

“Overall, Sainsbury’s has done just about all it can to better itself and it should be commended for that, but the Argos albatross around its neck can’t be ignored.”

Head of investment at interactive investor, Victoria Scholar, also highlighted that shares in Sainsbury’s had fallen 3% following the supermarket’s announcement.

Scholar suggested that Sainsbury’s has struggled to “differentiate itself” from rivals with stiff competition on price from Aldi and Lidl, while its premium ranges have fallen short of those on offer at Waitrose and Marks & Spencer.

However, Scholar added: “Sainsbury’s continues to make headway in growing its market share versus rivals with potential for further growth as inflation pressures subsides, a boost from the summer sun that has only recently appeared, and the excitement around the Euros.

“Sainsbury’s was able to keep its full-year guidance unchanged for underlying operating profit of £1.01bn and £1.06bn representing growth of between 5% and 10%.

“Investors have had a tough time with the stock, which is down around 16% so far this year, compared to Tesco up over 4%. And they have failed to get enthused by the supermarket’s mixed performance today, with the stock shedding around 3%.”

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