Sainsbury's has Argos to thank for latest sales growth

Sainsbury's like-for-like sales in its fourth quarter were down 0.5% but the performance of Argos, which it acquired last year, pulled the group into positive sales growth of 0.3%.

Chief executive, Mike Coupe credited the last quarter's performance to investments the supermarket brand has made in its quality, choice and value of its food offerings. 

"Our Tu clothing brand again performed ahead of the market, with sales up 5%," he added in a statement. 

In February, Sainsbury's announced plans to turn Tu into a high-street fashion brand

The brand's general merchandise sales for the quarter, however, were down by 4%, impacted by this year’s later Mother’s Day and Easter

Sainsbury's total results were buoyed up by Argos' strong performance with total sales for the three months ending 11 March 2017 up by 3.8% and like-for-like sales up 4.3%.

In the last three months, the company has opened 11 new Argos Digital stores in Sainsbury’s supermarkets, bringing the total to 41. It has also opened a Mini Habitat store in a Sainsbury’s supermarket, bringing the total to eight.

Sainsbury's convenience stores remain a strong source of growth for the brand. Total sales grew nearly 7% and the brand launched ten new stores in the quarter. 

Overall, groceries online grew by 7% with orders up 8% in the fourth quarter.

"We are investing in digital to deliver excellent service and availability, with enhancements to the Argos website and app. Online participation is growing, driven by mobile and Fast Track delivery and customers are responding well to new ranges," commented Coupe. 

He commented during a call with analysts and investors this morning that: "For Sainsbury’s, 25% of transactions are now made via our online grocery apps, while Argos is pushing towards 60% online or mobile phone."

Sainsbury’s results are emblematic of the changing nature of grocery shopping in the UK, commented Shoppercentric managing director, Danielle Pinington.

"Convenience and online sales remain strong, whilst the main estate sees a drop. They need to ensure the core of the estate develops to appeal to today’s shoppers, who may have quite specific missions, but be open to persuasion if the in-store experience is compelling enough.

However, any growth is to be celebrated when competition against Morrisons and Tesco is taken into account commented Paul Thomas, senior consultant at Retail Remedy. 

Thomas complimented Sainsbury's recent "Food Dancing" campaign as one with broad appeal, and its Tu Clothing outdoor responsive ads have "upped their clothing game and builds on market share growth". 

"We have criticised Sainsbury's for its in-store execution of Tu clothing in the past and so we hope the customer sees a well merchandised and appealing offer in the aisles and not just on outdoor ads. The gains that Tu clothing have made in sales could be significantly better if this is achieved," Thomas concluded. 

Emily Tan

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