Sainsbury’s boss Coupe to tackle ailing toys and gaming sales

The supermarket giant, which owns Argos, suffered a 3.9% fall in general merchandise sales during the 15 weeks to January 4 as two of its major non-food categories felt the pinch.

Sainsbury’s said the toy market shrunk 10% year on year, while gaming tumbled “over 35%”. The grocer did not break out specific figures across the two categories but said its performance was “broadly in line” with the wider market.

Coupe admitted Sainsbury’s “significantly overtrades” in toys and gaming – Argos is the largest toy retailer in the UK and the group also accounts for around 18% of all cash spent on games and consoles in the UK.

Although Coupe expects Sainsbury’s general merchandise performance to improve in the final quarter of its financial year, he said the retailer “would want to do something about” its over-exposure to those contracting categories.

“Last year we saw the market decline and this year we saw the market decline, so there is clearly an underlying trend there,” Coupe said. “If you buy an iPad for a few hundred quid, that’s a lot of toys in Argos. So, if people are swapping consumer electronics and other related items for toys, then that would, at least in part, be some of the explanation.

“We actually had a relatively good quarter for electronics, our market share grew, and we had a very good quarter on mobile as well, so there are some counter-balancing factors. But it’s something we will look at closely when we come to review our overall Christmas performance because it’s clearly an area where we overtrade – and we would want to do something about it.”

Despite that admission, finance boss Kevin O’Byrne said he would expect Sainsbury’s performance in gaming “to improve this year as new consoles are released”. Coupe added that general merchandise sales would start to recover before the end of its current financial year.

“By the very nature of the categories, games and toys are clearly very heavily oriented towards Christmas, so you’ll see that disappear in the next quarter,” he said.

“I’d anticipate, without making myself a hostage to fortune, that our general merchandise performance should improve in the final quarter, which we are now in.”

The cautious consumer backdrop added to the pressure on Sainsbury’s non-food business as political uncertainty continues to swirl, despite a decisive result in December’s general election.

Coupe said the Conservative majority government brought “no significant change in terms of trading” and warned that the UK remained “in relatively uncertain times”.

He said: “There is nothing on the horizon that looks like it’s going to change what has been a challenging consumer environment.

“If you stand back and look at the macro drivers, the reality is that customers have more money in their pockets than they did this time last year, they are just careful in the way they are spending it. That is reflected in retail sales over Christmas.”