Argos treated like an ‘unloved child’ by Sainsbury’s
Argos “is not performing to the best of its ability” and the strategy of its owner, FTSE 100 giant Sainsbury’s, has left it like an “unloved child”, according to an analyst.
The future of Argos was thrust into the headlines after Sainsbury’s confirmed in September that it was in discussions to sell the retailer to Chinese e-commerce giant JD.com.
However, a day later, Sainsbury’s terminated the talks with JD.com.
Since then huge losses have been revealed at the retailer as it cut thousands of jobs amid falling sales.
According to Dan Coatsworth, head of markets at AJ Bell, the decision by Sainsbury’s to close a lot of Argos stores in recent years and a plan that “stuck the brand as a concession inside supermarkets” has meant the retailer is less visible.
He added that while “that might save a lot of money on rent and maintenance it also risks Argos no longer being front of mind for someone looking to buy general merchandise”.
Coatsworth also said Sainsbury’s “declaring a food-first strategy hasn’t helped Argos”.
The analyst said “it’s like a parent publicly declaring one of their offspring to be the favourite, and the other children left unloved”.
Sainsbury’s did not respond to Morning Wire when contacted for comment.
Argos sheds more than 2,000 jobs
Accounts filed with Companies House recently revealed Argos fell to a pre-tax loss of £223.2m for the 12 months to 1 March, 2025.
The loss came after the retailer posted a pre-tax profit of £37.3m in the prior financial year.
The results also showed its revenue fell from £4.22bn to £4.13bn over the same period.
Argos also reduced its headcount in the year from 12,000 to 9,800 employees.
In the results, the company said its lower revenue was “driven by a subdued and highly competitive general merchandise market”.
It added that there had been a “significant reduction” in online traffic during the first half of its financial year and that a “cooler and wetter summer” meant its sales were behind expectations.
However, Argos said that while “remaining highly promotionally driven its sales improved during the final six months “as the online traffic improved”.
It also said that the company returned to year-on-year growth in its fourth quarter.
Included in Sainsbury’s half-year results, which were released last month, Argos’ sales totalled almost £2bn for the first half of its current financial year.
Its first quarter sales were £1.1bn while its revenue was £861m in the second three-month period.
‘Yo-yoing from profit to loss reflects how tight margins are’
Dr Gordon Fletcher, associate dean for research and innovation at the University of Salford, said Argos’ recent results “presents a challenging question for Sainsbury’s” over whether to sell the retailer or hold on to it for now.
He added that the “bricks-and-clicks business model for Argos still brings additional costs that are not found with the more dynamic virtual-only retailers”.
Dr Fletcher also said that while “it’s clear that the sell option is under consideration by management”, “the hold option for Sainsbury’s may be a harder decision”.
“The loss of £220m is over five per cent of its reported revenue and contrasts with very modest success last year.
“The story over the past few years has been a case of yo-yoing from profit to loss that reflects how tight the margins are for the UK retail sector.
“These ups and downs come in so many different ways and from so many directions.
“The explanation for these most recent results has focused on cautious consumer spending combined with the weather over the end of summer.
“But underlying these variabilities, the bricks-and-clicks business model for Argos still brings additional costs that are not found with the more dynamic virtual-only retailers.
“Although, never fully disclosed, the very brief negotiations to sell Argos to Chinese online retailer JD.com in September may have stumbled for these reasons too. It is clear that the sell option is under consideration by management.
“The hold option for Sainsbury’s may be a harder decision. Reducing the worker base reduces costs but it does little to benefit the experience of shopping at Argos.
“The evolution from the old catalogue model has been a rocky one for all the former UK high street staples.
“Littlewoods went to the pure online model. Others have gone the same way or just disappeared.
“The alternative route would be to move to a full face-to-face experience and then headlong into an entirely different set of competitors.
“Either way, the hybrid model for general merchandise appears to be an increasingly difficult one to sustain.”