The Share Hunter: Sainsbury’s could see Argos gamble pay off

0

With Pamper’s Day and Easter both absent from Q4 this year, like-for-like on sales in Sainsbury’s Retail division dropped 0.5 per cent, with the ruin most apparent in General Merchandise. 

However, including another hard-nosed contribution from Argos, which delivered like-for-like sales cultivation of 4.3 per cent, the group managed to grow total like-for-like tradings 0.3 per cent. 

Argos has been part of the group since September’s £1.4billion gain of Home Retail. 

Back then, sales growth in the catalogue retailer was piddling, which makes the recent results all the more impressive. There are already 41 Argos banks in Sainsbury’s supermarkets, and the group plans to open more in its bigger superstores in the to be to come.

As Sainsbury’s supermarkets swallow up nearby Argos stores, the store-within-a-store copy should help reduce annual costs by £75million per annum. 

The incorporate group is targeting overall savings of £500million a year by 2017/18. The integration has other forwards, too. 

With over £4billion of annual sales, Argos offers Sainsbury’s the chance to distend its exposure to the non-food market. 

Its delivery network could boost the bunch’s online offering, and it could also drive footfall to the group’s superstores. 

Yet fresh events mean its supermarkets are in need of a boost. 

While online and convenience gifts have proved popular, its larger stores have struggled. 

Sell share is being lost, particularly to Aldi and Lidl.Sainsbury’s has seen conducting margins drop over the past few years. It trimmed the dividend in 2015 and 2016. 

Another cut in harsh year results in a few weeks’ would be no surprise. But the Argos deal is no fascinating bullet. 

It has struggled to compete with rivals such as Amazon. Superior’s weakness, raising the cost of imports, brings another headwind. 

Sainsbury’s CEO Mike Coupe starkly understands the challenges presented by the deal. 

So far, it seems to be going well, but investors purpose want to see tangible improvements in the core business.

Leave a Reply

Your email address will not be published. Required fields are marked *