Sainsbury's has reported contrasting results for its newly enlarged business for the final quarter of 2016/17. Strong sales growth at Argos helped to offset a slight fall in Sainsbury's headline retail like-for-like sales, which were impacted by the later timing of Mother's Day and Easter this year.
Encouraging growth at Argos
At Argos, LFL sales were up +4.3% in the nine weeks to March 11th, a pick-up on the 4.0% achieved in Q3, with strong growth in technology categories. Performance was also boosted by investments in service and availability, and enhancements to the Argos website and app. At the same time, Sainsbury's continued to introduce Argos concessions to more of its stores: 11 opened during the quarter taking the total to 41. The 10 shop-in-shops that have been open for more than a year continued to deliver very strong LFL growth of around 25% and online participation continued to grow. Sainsbury's expects to open 25 more Argos concessions at supermarkets over the next quarter as it works towards its 250 store target over three years.
Headline LFL impacted by event timing
Sainsbury's retail LFL was -0.5% for the quarter, a step down from the +0.1% achieved in the Q3 Christmas quarter, impacted by a 4% fall in general merchandise sales reflecting the later timing of Mothers Day and Easter this year. Adjusting for this shift, Sainsbury's estimates LFL retail sales would have been +0.1% in Q4. Even so this LFL figure was lifted by the return of slight inflation by the end of the quarter and LFL volumes were slightly negative. For the full 2016/17 financial year, retail LFL sales were -0.6% (2015/16 = -0.9%).
Strategy to impact external challenges
To mitigate the gradual long term decline in volumes, Sainsbury's is focusing more on delivering quality, choice and value across its food offer. To improve value, it continues to simplify its trading strategy, cutting back promotions to concentrate on lower regular prices. Key here are continuing initiatives with suppliers to reduce costs and improve internal efficiency. Sainsbury's is also keen to differentiate further on food quality by launching innovative products. Example launches during the quarter include sweet potato tagliatelle and butternut squash waffles, creating distinct reasons for shoppers to choose Sainsbury's over competitors.
Investment in growth channels
Sales continued to build in Sainsbury's online and convenience businesses. Online sales were up 7% and orders by 8%, as Sainsbury's furthered its strategy of steady investment in the channel rather than aggressive customer acquisition. Sales were helped by integrating Sainsbury's recipe and online grocery websites, making it easy for shoppers to add recipe ingredients to their online orders. Convenience sales grew by 7%, helped by strong LFL growth and 10 new shops. By the end of the quarter Sainsbury's operated 806 Local stores including nine Eurogarages concesions.
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