Tu and Argos strength helps Sainsbury's through tough Q4

By

Sandra Halliday

Published
Mar 16, 2017

There was a frustrating absence of detailed information about the Tu fashion range in the Sainsbury’s Q4 trading statement Thursday morning as the UK supermarkets giant chose to talk up its Argos business instead.

But we did learn that sales for the fashion offer at the chain rose an impressive 5% in the nine weeks to March 11 with the company’s CEO saying the label “again performed ahead of the market,” based on Kantar Worldpanel figures.

Tu has been a bright spot for the retailer for some time with fashion managing to progress speedily even as its core grocery operations stalled. As a result the firm has added to its offer with more upscale pieces for both women and men. It has also taken on the Portas Agency and tasked it with making Tu more of a high street-style destination brand.

But with little Tu information available, much of the trading update focused on Argos, the general merchandise chain the company acquired last year and which is still dividing analyst opinion over the wisdom of the acquisition.

So what picture did it paint for the period? And did the figures support the view of the doubters? Not at all.

The company said combined Sainsbury's and Argos like-for-like sales rose just 0.3% with total retail sales at the Sainsbury’s chain (again with fuel factored-out) up 0.1%. But Argos on its own saw like-for-likes up 4.3% and total retail sales up 3.8%.

Group CEO Mike Coupe said he was “pleased with this performance and [we] are making good progress against our key priorities.”

He said that with Argos delivering good growth, the company is “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.”

The Argos performance looked especially good given that Sainsbury's own general merchandise sales were down by 4% over the quarter, impacted by this year's later Mother's Day and Easter

Argos delivered strong sales growth in technology categories, with particularly good contributions from mobile phones, video gaming, wearable tech and sports equipment

And overall, while Coupe added that the market remains “very competitive and the impact of cost price pressures remains uncertain,” he said the business is “well placed to navigate the external environment and remain focused on delivering our strategy."