Poor GM performance hinders otherwise good Christmas at Sainsbury’s, says GlobalData

FacebooktwitterredditpinterestlinkedinmailFacebooktwitterredditpinterestlinkedinmail

Following today’s release of Sainsbury’s Q3 figures for FY2019/20, Thomas Brereton, retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘Much as expected, Sainsbury’s Christmas results today revealed a mixed bag for a retailer in a state of recovery after a bruising 2019.

“The 0.4% rise in core grocery sales is likely to be one of the more pleasing statistics for Sainsbury’s (with all grocers struggling to generate real growth in a grocery market with near-zero inflation), coupled with a 4.4% rise in clothing sales suggesting a strong outperformance from its Tu range (particularly womenswear, according to Sainsbury’s).

“However, general merchandise sales – which fell 3.9%, the third successive quarter of decline – firmly dragged the supermarket’s overall performance from good to mediocre – especially considering the growth in comparison of a dire performance last year. But even though the marked 0.7% decline in both total and l-f-l retail sales suggest Sainsbury’s still has significant work to do to improve, these results in the context of a highly competitive market (Morrisons yesterday announced l-f-l sales declined c.2% over the same period) will give Sainsbury’s reasons to be hopeful going into 2020.

“The major headache Sainsbury’s must now solve is its clearly struggling GM division, and in particular, its integration of Argos with the rest of the business. Despite taking big steps in attempting to differentiate Argos from its competitors – such as extending same-day delivery to 1pm on Christmas Eve – physical shoppers are not engaging with the new store-in-store format as much as Sainsbury’s would be hoping for at this stage.

“CEO Mike Coupe points to a slowing toys market (which he claims has fallen 20% in the last two years) and a drop in the gaming market as reasons for Argos’s underperformance. But it is the responsibility of Argos to adapt quicker to such changes in shopper habits, and GM will potentially require a drastic review in the early stages of 2020 if it is to fully recover.”