What do the Christmas sales numbers hint at for J Sainsbury’s future?

Could the difference between the food and the Argos arms of the company be signs of the fundamental issues at Sainsbury’s?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shopping is moving online, and it has been for years. We all know it, and the chances are all of us have made the shift to one extent or another ourselves over the past few years.

Exactly what we are willing to buy online however, or perhaps rather the stores we are willing to buy it from, seemed to make itself clear earlier this month when J Sainsbury (LSE: SBRY) said that over the Christmas period, its strong sales in food and clothing were offset by poor numbers at Argos, notably for toys and computer games.

The ‘A’ elephant in the room

This of course, makes total sense to anyone who partakes in online shopping. For food and groceries, you head over to the online version of your favourite high street store – such as Sainsbury’s, Tesco or Ocado. You know the food you like, so you can buy it online easily. You know you are getting the same price you would do in-store, without the inconvenience of actually having to go there and carry your groceries home.

Interestingly supermarket fashion seems to be seeing a similar pattern. I think this is down to the branding, trust and familiarity with supermarket clothing lines these days, coupled with the value price tag for clothes of reasonable quality. Better design helps too, as well as general one-stop-shop convenience.

So why did Argos suffer during what should have been its most profitable time of year? Well let me ask you a question: apart from food and clothes, if I asked you to buy a toy, video game, or almost anything else online, where would you go first? I suspect that for most of us the answer is Amazon.

The large number of products, the competitive pricing and the familiarity with the process (if you have bought a toy from the UK on Amazon, there is usually little difference in the process than buying a set of golf clubs from China or a gas stove from Italy), make that the first online stop for most of our shopping needs.

Stick to your strengths?

For those of us of a certain age in the UK, Argos has a brand that we can’t help but associate with Christmas/birthday/treat happiness. Having looked through the catalogue for potential gifts or things to spend my pocket money on as a child will always leave me with a certain fondness for the brand.

Unfortunately for Sainsbury’s, I will still do my general merchandise shopping on Amazon, and I think most people are the same. This brand fondness did little to save Woolworth’s after all – another store in which I (and many others) used to spend pocket money.

I think this raises the idea that perhaps Sainsbury’s would benefit from sticking to its strengths. As much as we may collectively experience moral outrage about a giant like Amazon gaining a monopoly (and rightly so), one could argue that Sainsbury’s will see a greater benefit from not trying to compete directly in its arena. For food and clothes on the other hand, we will all still get in line.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

The Motley Fool UK has no position in any of the shares mentioned. Karl has shares in J Sainsbury. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »