Sainsbury’s attributes Argos’s decline to Reeves’s Budget

Sainsbury’s Faces Argos Sales Slump Amid Budget Concerns

Investor worries about Argos’s performance led to a sharp decline in Sainsbury’s share price.

Sainsbury’s has attributed a recent decrease in Argos sales to the impact of the latest Budget, saying that Rachel Reeves’s tax policies dampened consumer confidence ahead of the holiday season.

The supermarket chain reported that customers were hesitant to purchase big-ticket items like furniture during the festive period, with spending noticeably reduced in November.

Simon Roberts, Sainsbury’s CEO, commented, “We saw a degree of caution, especially as the Budget approached.”

He noted that Argos experienced muted demand over Christmas, resulting in a 2.2% drop in sales during the six weeks leading up to January 3.

Roberts added, “Overall, shoppers are being much more careful with their spending.”

Budget Speculation Weighs on Shoppers

Speculation about possible tax hikes by the Chancellor unsettled consumers before Christmas. In early November, she suggested that everyone would need to contribute to strengthening the UK’s finances, which many interpreted as a sign that income tax might rise—a plan that was later abandoned after political pushback.

Despite the reversal, business leaders said the uncertainty had already led to reduced household spending before the holidays.

Additionally, the decision to freeze income tax thresholds in the Budget is expected to further discourage spending on non-essential goods.

Roberts emphasized, “We must ensure we’re offering the best value for customers as we move through the year.”

Market Reaction and Competitive Pressures

News of Argos’s struggles triggered a sell-off in Sainsbury’s shares, making it the largest decliner in the FTSE 100 on Friday. The stock fell by 5.3%, erasing approximately £400 million from the company’s market value.

Roberts also pointed to increased competition from Chinese online retailers Temu and Shein, which has led to fewer visitors to the Argos website.

He welcomed the government’s recent announcement to close a tax loophole benefiting overseas sellers, urging that the changes be implemented swiftly.

The Chancellor plans to revise the de minimis rule—which currently exempts imports under £135 from UK duties—by 2029, aiming to support British retailers and prevent foreign companies from undercutting domestic businesses.

Roberts remarked, “I’m confident the government will act quickly, as fair competition is crucial in this market.”

Future of Argos Under Scrutiny

The ongoing difficulties at Argos have reignited speculation that Sainsbury’s may consider selling the brand, which has been a challenge for the company in recent years.

Sainsbury’s Grocery Business Sees Growth

Despite Argos’s troubles, Sainsbury’s reported a 5.1% increase in grocery sales during the six weeks to January 3, 2026, as more customers shopped for food over Christmas.

The company has been focusing on a “food first” approach, dedicating more store space to fresh products.

Last summer, it was revealed that Sainsbury’s had been in discussions with JD.com about a potential sale of Argos, though those talks ultimately fell through.

However, Roberts has since suggested that a sale remains possible, noting that the process with JD.com demonstrated that Argos could be separated from the rest of the business.

Speaking to analysts in November, he said, “It’s not something that can be done overnight, but we’ve identified a path forward.”