Sainsbury’s has blamed the performance of its Argos business on “significant headwinds” from a fall in consumer confidence during the company’s Christmas trading period.

The supermarket group, which bought Argos for £1.4bn in 2016, announced that its supermarkets increased sales by 3.4% at established stores in the three months to 3 January but Argos sales fell by 1% in the same period.

Sainsbury’s, announcing a trading statement for the Q3 period, also revealed that in the final six weeks to 3 January its Argos sales were down by 2.2% compared to the corresponding period last year.

The company suggested that growth in its Argos business was dampened by the impact of lower average selling prices across the market, driven by “subdued spending on higher ticket items”, such as furniture, heavy promotional activity and a weak gaming market.

Despite the slowdown for Argos, Sainsbury’s still posted growth in grocery sales for the third quarter running this year, as the group also highlighted it had won grocery market share for the sixth consecutive Christmas period.

“We expected the market to become more competitive with customers spending more carefully and we invested in balanced choices to offer great value for money, outstanding quality and innovation and leading customer service and availability, both in store and online,” Sainsbury’s chief executive, Simon Roberts, said.

Sainsbury’s also revealed it was making “good progress” against an ongoing target to deliver £1bn of cost savings by March 2027.

However, the FTSE 100 supermarket group has seen its share price dip by 5% in today’s trading since releasing its Q3 results this morning.

Equity research analyst at Quilter Cheviot, Lucy Rumbold, commented that groceries were continuing to be the “driver of performance” for Sainsbury’s.

“Sainsbury’s stands to benefit from the consumer shift towards trading down eating out for eating in,” she added. “Additionally, fresh produce continues to outperform as consumers become more health conscious than ever and more opt to cook from scratch.

“Management has attributed the weakness in Argos to weak consumer confidence, as well as many mark downs and generally lower pricing to stay competitive. This has been observed across the market but ultimately puts a squeeze on margins.”

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