Jul 4, 2017
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Fashion powers on at Sainsbury's as Tu Clothing grows in-store and online

Jul 4, 2017

Sainsbury’s hailed its “differentiated strategy” as as a key factor in its strong performance for Q1 with the UK supermarkets giant also upbeat on its Tu Clothing brand and saying Tuesday that its total sales in the 16 weeks to July 1 rose 2.7%, excluding fuel.

Sainsbury's Tu Clothing

That may not seem like a huge leap compared to some in the retail sector, but for a supermarket in a tough environment, it’s pretty impressive. And it’s particularly interesting given that it’s the first period that has full comparisons for its acquired Argos unit. Plus the company said it “outperformed the market in General Merchandise (GM) and Clothing,” which is definitely good news.

The company also said its comparable sales (again with its petrol stations excluded) rose 2.3%.

Importantly for fashion, clothing sales rose 7.2% with good growth both in stores and online as the firm’s investment in its Tu Clothing line paid off. That continued a strong run for the label with the firm’s clothing ops having seen a 9.4% rise in Q3 last year and a 5.2% hike in Q4.

The company has put heavy marketing support behind the fashion offer in recent periods with a new agency (Portas) tasked with making the supermarket a fashion ‘destination’. It has also expanded the line with more premium fashion and created more places where goods ordered online can be picked up following its Argos acquisition.

The company has 212 digital collection points in its supermarkets, where customers can collect DPD, eBay and Tu clothing, 142 of which are enabled for Argos orders. It is also trialling six collection points in convenience stores and with the company in talks to buy convenience chain Nisa, the number of very local collection points could rise fast.

An upbeat Mike Coupe, the firm’s CEO, said GM  including Argos was also strong, even though growth of just 1% trailed the 3.7% and 1.5% of the past two quarters.

He also said the firm’s Fast Track delivery and collection (which prioritises pick-ups and deliveries for those who buy and pay in advance online) enjoyed “a stellar performance during the quarter, particularly during the period of warm weather when customers wanted to buy and receive their products the same day.” That was encouraging as a sign that, finally, the weather was proving to have a positive impact on a UK retailer’s operations.

Coupe said that Argos, which began as a chain of catalogue stores where people would browse in-store and order from there, is now seeing customers who “are increasingly choosing to shop with us online, consistent with our objective of being a leading digital retailer.”

And while those GM sales rose only 1% on an underlying basis, that was achieved as the company faced the closure of 78 Argos outlets in the divested Homebase stores and 84 Habitats in Homebase concessions over the last year, causing major disruption to the sales flow.

Despite this, the company said Argos continues to perform well, growing its market share, with strong rises in Mobile, Audio and Tech categories and good growth in Core Electricals and Toys.

As mentioned, online and mobile sales continue to rise at Argos, with online sales up 10% and Fast Track delivery and collection soaring (up 36% for delivery and 64% for collection).

The company opened 36 Argos Digital stores in Sainsbury's supermarkets, bringing the total to 75 during the quarter. Seventeen of the 36 stores replaced an existing Argos store, taking the total number of replacement stores to 20. It also opened three Mini Habitat stores, bringing the total to 11.

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