Sainsbury’s sales suffer setback

Sainsbury’s sales slipped into decline in the fourth quarter, on a like-for-like basis, in what was a mixed bag of figures for the UK grocery giant.

The group’s total retail sales continued to be buoyed by its convenience and online channels, with both achieving 7 per cent growth during the quarter. But with Mother’s Day falling outside of the trading period and Easter almost three weeks later this year, sales were impacted across the board with general merchandise taking the greatest hit, observes Tom Berry, associate retail analyst with GlobalData.

After six months as part of the Sainsbury’s stable, Argos like-for-likes rose 4.3 per cent, buoyed by 41 Argos concessions and around 200 click & collect points in Sainsbury’s stores already established. Berry says the speedy rollout of Argos is maximising footfall in Sainsbury’s underperforming larger stores.

“However, as we anticipated, the growing presence of the Argos brand in stores and online will have an ongoing negative impact on Sainsbury’s general merchandise division – down 4 per cent in the fourth quarter, despite a 5 per cent rise in Tu clothing.”

Berry says Sainsbury’s’ traditionally higher operating margins – 2.8 per cent in 2015, compared with 1.2 per cent at Tesco – leave it better placed to weather the inflationary headwinds forecast for 2017 by providing it with greater flexibility to absorb some of the rising costs rather than pass on to the customer.

“Moreover, the streamlining of its operations came to the fore earlier this month as the retailer announced the axing of up to 400 jobs through the removal of the role of price controller in stores. As the latest in a string of retailers (including rivals Tesco) to announce job cuts in the UK this year, it is clear that companies across the board are preparing for a tumultuous cost-cutting year in retail.”

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