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Sainsbury’s clothing sales dip but CEO stays upbeat as e-sales soar

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today May 1, 2019
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Sainsbury’s may be feeling battered and bruised after its merger plan with Asda failed to get competition authority approval, but the company is still getting on with business as usual, and its latest set of results showed it’s not doing quite as badly as some had predicted, even though it’s not exactly booming either. And while clothing sales fell, they still outperformed the market.


Tu Clothing


Looking at the headline figures, the company said its full-year profit for the period to March 9 “was ahead of consensus,” although its net profit still plunged to £219 million from £309 million. And pre-tax profit fell to £239 million from £409 million. The £46 million it spent on the merger had an impact, as did big restructuring and pension costs.

But while there’s been lots of talk about Sainsbury’s under-performing compared to its supermarket rivals, its shares rose sharply as the share markets opened so investors think it’s doing something right, or perhaps they don’t see it as quite such a weak prospect as last week’s share price fall had suggested.

THE DETAIL

So what actually happened during the year? The company preferred to focus on the fact that with all the additional expenses stripped out, underlying profits rose 7.8% to £635 million, group sales rose 2.1% to £32.4 billion, revenue edged up to £29 billion from £28.5 billion, and the company cut its debt load by £222 million to £1.636 billion. And it said it’s accelerating its investment in its store estate and in technology as it targets faster growth online.

It added that its supermarkets benefited from the presence of Argos stores in its branches even though meaningful sales growth for the company as a whole remained elusive. Like-for-like sales fell 0.2% in the year, with a bigger 0.9% fall in Q4. And while general merchandise was flat (falling in the second half after rising in H1), clothing was even less buoyant. Its turnover fell 0.8% after dipping in every quarter last year, with the biggest drop (1.6%) coming in Q4. 

But that performance isn’t seen as particularly bad by the company as it said “our General Merchandise and Clothing business is performing well in a highly competitive market.”

Its Tu Clothing brand is the sixth largest clothing label in the UK by volume and it “outperformed the market.” And while sales declined, the retailer’s “decision to remove a key promotional event during the year helped increase full-price clothing sales by 12%.” It also said that e-sales of the brand rose 55% in the year and the label has now launched on the Argos website so now has greater exposure and more sales opportunities.

And talking of Argos, its sales grew, “outperforming a highly competitive and very promotional market by 2.2% [but] margins remained under pressure, impacted by strong sales of lower-margin consumer technology products.”

And it wasn’t only margins that were under pressure with company CEO Mike Coupe, who’s seen as the architect of the failed Asda merger strategy, having come in for quite a lot of criticism in recent weeks. 

But he stayed upbeat on Wednesday and said that the company “completed the integration of Argos that we set out in 2016, delivering £160 million in synergies ahead of schedule. We completed a major transformation of how we run Sainsbury’s stores and have made significant improvements to store standards in recent months, which remain a focus.

“We will increase and accelerate investment in the core business, investing to improve over 400 supermarkets this year. £4.7 billion of our revenue now comes from our online businesses and we are increasing investment in technology to make shopping across Sainsbury’s, Argos and Sainsbury’s Bank as quick and convenient as possible.”

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