Sainsbury's delivers strong Q1 performance

Earlier today J Sainsbury's PLC, owner of the Argos and Habitat brands released their first quarter trading update.

• Retail sales1 up 2.7 per cent (excl. fuel)
• Retail like-for-like sales2 up 2.3 per cent (excl. fuel)3
• Grocery sales up 3.0 per cent and transaction growth of 1.9 per cent at Sainsbury's
• Outperformed the market in General Merchandise and Clothing

Mike Coupe, Group Chief Executive, said:

“We have delivered a strong performance, driven by our differentiated strategy, offering customers quality, value and choice across food, general merchandise, clothing and financial services. Grocery sales are up three per cent and transactions up two per cent, with like-for-like transaction growth in all channels. We have seen strong food sales where we have invested in product innovation, such as our new Summer eating ranges. Our Produce category, where we know quality matters most to customers, performed particularly well, outperforming the market4 with volume growth of over one per cent.

“Customers recognise that we offer a leading combination of quality and value and we have worked with suppliers to improve our price position versus competitors5. We are proud of the service our colleagues give customers day in day out and were delighted to have been recognised for best service and availability for the fifth year in a row6.

“Groceries Online sales grew by eight per cent and Convenience delivered strong growth of ten per cent, in line with our strategy of being there for customers whenever and wherever they want to shop.

“General Merchandise and Clothing, including Argos, outperformed the market, with Fast Track delivery and collection seeing a stellar performance during the quarter, particularly during the period of warm weather when customers wanted to buy and receive their products the same day. Argos customers are increasingly choosing to shop with us online, consistent with our objective of being a leading digital retailer.

“The market is competitive and we continue to manage cost price pressures closely. Our strategy is delivering and we are well placed to navigate the external environment.”

Strategic and operational highlights

We have prioritised four key areas of our business where we can differentiate ourselves, grow and create value:

Further enhance our differentiated food proposition

• We continue to create distinctive food ranges. We offer great quality and value on everyday purchases and are introducing innovative new products, responding to the latest trends
  • We launched 430 new and improved products in the quarter including over 250 new Summer eating lines. We know our customers enjoy fresh, convenient meals and we launched 43 new or improved meals within our Just Cook range. We also added ten new lines to our Slow Cook range, enabling our customers to make restaurant quality food with ease at home. In total we completed 32 range reviews during the quarter, covering 17 per cent of grocery sales
  • We are working with our suppliers to offer customers market-leading value and have improved our price position versus competitors in the quarter. For example, to celebrate Summer, our customers were able to enjoy fantastic prices on Jersey Royal potatoes and British strawberries
• We continue to invest in channels to meet customers’ changing shopping habits:
  • Total transactions grew two per cent
  • We opened one supermarket and ten convenience stores (including one EuroGarages franchise store) 

Grow General Merchandise and Clothing and deliver synergies

• General Merchandise sales grew by one per cent on an underlying basis (including Argos in last year’s base), outperforming the market despite the impact of closing 78 Argos in Homebase and 84 Habitat in Homebase concessions over the last year
  • Argos continues to perform well, growing market share, with strong growth in Mobile, Audio and Tech categories and good growth in Core Electricals and Toys
  • Online and mobile sales continue to rise at Argos, with online sales up ten per cent. We saw strong growth of Argos Fast Track delivery (up 36 per cent) and collection (up 64 per cent), which were particularly popular during the hot weather, when customers wanted products like paddling pools and fans on the day 
• Clothing sales were up over seven per cent, reflecting strong growth both in stores and online 
• We opened 36 Argos Digital stores in Sainsbury’s supermarkets, bringing the total to 75. 17 of the 36 stores replaced an existing Argos store, taking the total number of replacement stores to 20. We also opened three Mini Habitat stores, bringing the total to 11. We remain on track to open around 135 Argos Digital stores in Sainsbury’s supermarkets by the end of 2017/18, which will take the total to 175
• We have 212 digital collection points in our supermarkets, where customers can collect DPD, eBay and Tu clothing, 142 of which are enabled for Argos orders. We are trialling six collection points in convenience stores
• We remain confident of delivering £160m of EBITDA synergies from the Argos acquisition by March 2019 

Diversify and grow Sainsbury’s Bank

• We increased our active customer base in Sainsbury’s Bank by six per cent year-on-year and we are on track to deliver our plans 

Continue cost savings and maintain balance sheet strength

• We are on track to achieve £145m of cost savings this year, delivering on our three-year target of £500m

Read - Sainsbury's Argos Q1 results - analysis & comment.

Source: Insight DIY Team & Sainsbury's PLC press release

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