Sainsbury's Shares Slide as Argos Weighs on Festive Cheer
Shares in the FTSE 100 supermarket chain Sainsbury's dropped by more than 4 per cent on the morning of Friday 9 January 2026, a surprising reaction to quarterly results that showed robust growth in its core grocery business. The decline came even as the company reaffirmed plans to return over £800 million to its shareholders this year.
Grocery Strength Versus General Merchandise Weakness
The third-quarter trading update for the 16 weeks to 3 January 2026 revealed a tale of two divisions. On the positive side, Sainsbury's reported that its grocery sales grew by a healthy 5.4 per cent over the festive period, with CEO Simon Roberts stating the group had "won grocery market share for the sixth consecutive Christmas." Its premium 'Taste the Difference' range was a standout, seeing fresh sales surge by 15 per cent.
However, this success was offset by significant challenges elsewhere. Sales at Argos, acquired in 2016 for over £1bn, fell by 1 per cent over the quarter and declined by more than 2 per cent during Christmas. The company cited "subdued spending on higher-ticket items" and a weak gaming market. Combined general merchandise and clothing sales also dipped by over 1 per cent, blamed on "weaker market conditions" and unseasonably mild weather.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, noted: "Keep in mind that Sainsbury’s is more exposed to general merchandise than its peers, owing to its ownership of Argos. General merchandise is the most cyclical area of the supermarket economy... being overweight in this arena can really slow sales down when things get tough."
Solid Profits and a Major Cash Return
Despite these headwinds, Sainsbury's board confirmed the group remains on track to deliver an underlying retail operating profit of more than £1 billion for the full year. Furthermore, the retail free cash flow guidance was upgraded to above £550 million, from a previous target of more than £500 million.
Chief Executive Simon Roberts linked the strong cash generation to earlier strategy, explaining: "When we strengthened our profit guidance in November, we said we planned to invest in the strength of our competitive position through the most important trading period of the year." As a result, the 2025/26 outlook includes a confirmed capital return of over £800 million to shareholders. This will be executed via a £250 million special dividend and a further £250 million share buyback programme.
Analyst Aarin Chiekrie summarised the quarter as a "solid third-quarter performance," with the profit guidance firmly intact. The share price movement mirrors a similar reaction to rival Tesco's results a day earlier, which also saw its stock fall despite posting strong market share gains, suggesting broader investor caution towards the sector.
