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Sainsbury's profits are hit due to Argos losses

Published: 9 November 2017 - Kiran Grewal

The UK’s second largest supermarket chain reported an underlying profit before tax of £251 million which saw a loss of 9% as wage cost inflation and consolidation of Argos H1 losses took its toll, as well as the company being partly offset by synergies and cost savings.  

The supermarket chain took over catalogue retailer Argos as well as Habitat last year in a £1.4 billion deal; and in the past six months a further 73 Argos concessions have opened, this includes 8 micro stores, taking the total to 112 Argos stores open in Sainsbury’s, showing “positive momentum” across the business.

Commenting on the results, group chief executive Mike Coupe said: “We are integrating Argos at pace: we have 112 Argos stores open in Sainsbury’s supermarkets and will have 165 open by Christmas, in addition to nearly 200 digital collection points across our stores. We are rolling out Click & Collect for Argos and Tu clothing to 100 Sainsbury’s Locals and Argos Fast Track same-day delivery and collection are now our fastest growing channels. We are on track to deliver our £160 million EBITDA synergy target from the Argos acquisition six months ahead of schedule.”

The company opened 195 collection points in Sainsbury’s and trialled Argos collection points in Sainsbury’s local stores, which will now be rolling out to 100 stores.

Despite a hit on the profits, Sainsbury’s report like-for-like sales growth of 1.6% in the 28 weeks to the 23 September,

 

with underlying group sales rising 17% to £16.3 billion.

General merchandise was down by 0.1%

Convenience stores saw the largest increase in channels compared to Supermarkets and Online Groceries, with an 8.2% increase.

Group chief executive, Mike Coupe, looks to grow general merchandise and clothing and deliver synergies as sales “flat” year on year. This includes joint promotional planning and cross-selling of products i.e. aligned Black Friday offer for Sainsbury’s and Argos and selling Sainsbury’s Home products on argos.co.uk. Sainsbury’s online contribution has grown 7%, while sales from convenience stores saw a growth of 8%.

Plans for 2017/18 include an expectation to open 3 new Sainsbury’s supermarkets and around 25 convenience stores, open around 145 Argos stores in supermarkets resulting in around 185 Argos stores in supermarkets, close 41 Argos stores within Homebase in 2017/18, with 16 to remain open longer and open 8 Habitat stores within supermarkets.

Source: Sainsbury's plc

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