Sainsbury’s blames Reeves’s Budget for Argos slump

Sainsbury’s has blamed the Budget for driving a drop in sales at Argos as Rachel Reeves’s tax raid hammered consumer confidence in the run-up to Christmas.The supermarket said fewer people bought expensive items such as furniture during the festive period, with customers having “pulled back” on spending in November.Simon Roberts, the chief executive of Sainsbury’s, said: “Obviously there was some caution, particularly as we came towards the Budget.”He said demand at Argos over Christmas had then been “subdued”, which led to the brand posting a 2.2pc decline in sales in the six weeks to Jan 3.Mr Roberts said: “More broadly, customers continue to look very closely at what they’re spending.”The Chancellor rattled shoppers before Christmas by fuelling speculation over tax increases. She said in early November that everyone would “have to contribute” to help put Britain in a stronger position.The comments were seen as a strong indication that Ms Reeves was preparing to increase income tax – a plan she later scrapped following a backlash in Westminster.However, bosses said this had already filtered into weaker spending before Christmas.Ms Reeves’s decision to freeze income tax thresholds in the Budget is also expected to have hurt people’s appetite to spend on non-essential items.Mr Roberts said: “We’ve got to make sure we present the best value in that context as we progress through this year.”The warning over pressure on Argos prompted a sell-off in Sainsbury’s shares, making it the biggest faller in the FTSE 100 on Friday. Shares in Sainsbury’s were down 5.3pc, wiping around £400m from its market capitalisation.Mr Roberts said the weaker performance at Argos was also driven by more competition from Chinese sellers Temu and Shein. That competition hit visitor numbers to the Argos website, he said.Mr Roberts added that an upcoming government crackdown on a tax loophole used by the Chinese online giants – unveiled at the most recent Budget – should happen “as soon as possible”.The Chancellor has said the plan is to change the de minimis rule, whereby products worth less than £135 are exempt from UK import duties, by 2029.Ms Reeves has said this is part of a drive to “stand up for the British high street” as she seeks to prevent overseas retailers from undercutting UK companies because of the loopholes.Mr Roberts said: “I’m sure that they’ll be working hard to do that because a level playing field in this market is really important.”The growing pressure at Argos will prompt fresh speculation that Sainsbury’s will be seeking to offload the brand, which has proven to be a drag on performance in recent years.In the Christmas period, Sainsbury’s said it had won more customers in its grocery business with sales up 5.1pc in the six weeks to Jan 3, 2026.Sainsbury’s has recently been pursuing a “food first” strategy, where it has allocated more space in stores to fresh produce.The Telegraph revealed last summer that Sainsbury’s was in talks with JD.com about a potential deal for Argos, although the proposed sale later collapsed.However, Mr Roberts has since fuelled speculation that Sainsbury’s could still sell the business, saying recently that the process with JD.com helped it to realise that “Argos is separable”.Speaking to analysts in November, Mr Roberts said: “It’s not something that’s wholly straightforward immediately, but it’s something that we identified a route through.”