Nov 9, 2016
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Clothing and homeware rises boost Sainsbury’s despite profits fall

Nov 9, 2016

J Sainsbury may have reported another profits decline on Wednesday but it was good news on the clothing and homewares front.

The UK supermarkets giant is transforming itself fast into a general merchandise retailer and that is paying off as far as sales are concerned, even if profits have not yet caught up.

The Tu label is helping Sainsbury's win market share

The company said that for the half year to September 28, clothing sales grew 1%, which is not a bad result given the huge challenges in the UK fashion sector at present. It grew market share and said that sales growth helped cement its place as the sixth biggest clothing retailer in Britain by volume.

General merchandise rose an even stronger 5%, “driven by seasonal items and popular ranges such as design-led bedding and homeware.” It has been boosted here by the £1.4bn acquisition of Argos earlier this year. That purchase has made it “a market leader in … homeware.”

As part of the Argos integration, the company is opening 30 Argos digital stores by Christmas in its existing stores and creating another 30 Argos digital collection points. It said that these will form part of a rollout of 200 new digital collection points where customers can collect Tu clothing, eBay and DPD parcels.

But while it expects massive cost savings and synergies from that Argos buy in the medium-to-long term, for now the environment is tough. The company has invested in lower prices and this hurt earnings in H1 with underlying pre-tax profit down 10.1% to £277m. And underlying sales fell 1%, although total sales were up 2.1% to £13.923bn.

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