Sainsbury's fashion ops outperform the market in Q1

Supermarkets giant Sainsbury’s is continuing to forge ahead in its fashion and general merchandise (GM) operations even though its overall sales are proving sluggish at the moment.

Tu Clothing

The company issued a Q1 trading update on Wednesday and said overall like-for-like sales were up just 0.2% when petrol revenue was taken out of the mix. 

While its grocery sales rose 0.5%, its GM revenue was up 1.7% and clothing was up 0.8%. Admittedly, neither of those two figures were particularly stunning, but they both outperformed what is undeniably a weak market.

At least GM sales reversed several quarters of declines while clothing, although it couldn’t repeat the 7.2% and 6.3% rises of the first and second quarters last year, was better than the 0.4% rise of Q4.

CEO Mike Coupe said: “General Merchandise and Clothing, including Argos, continue to outperform a very challenging market and we are well placed to further grow market share. Argos stores in Sainsbury's supermarkets continue to grow, Fast Track sales were strong and we have now launched Tu clothing on the Argos website, a key strategic milestone.”

And the company’s acquisition strategy means that it should have more milestones ahead. Buying Argos may have divided opinion among the chain’s shareholders but it was undeniably an opportunity that allowed it to grow its fashion reach. 

And the planned merger with Asda, whose George clothing range is even better established than the Tu line, would also add to its strength, as well as offering it the chance to buy on better terms given the increased scale of its fashion ops in total.

Coupe didn’t have a lot to update the market on about the Asda deal but did say: “The market remains competitive. However, we have the right strategy in place and our proposal to combine Sainsbury's and Asda will create a dynamic new player in UK retail, with the scale to give customers more of what they want today and create a more resilient and adaptable business for the future. We have successfully agreed a financing package of £3.5 billion in relation to the proposed combination. The financing has been raised on attractive terms, reflecting the confidence of the lending banks in the outlook for the proposed combined business.”

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