Sainsbury's clothing puts in “strong” H1 performance
Sainsbury's clothing division performed well in H1
Sainsbury's today (11 November) said its clothing division performed "strongly" in the first-half of its financial year, despite the UK supermarket group revealing its lowest profit since 2010, sending its share price tumbling.
The retail group said it has continued to increase its market share in clothing, growing sales by nearly 10% in the 28 weeks ended 26 September. And initial online clothing sales, Sainsbury said, exceeded expectations after launching its Tu brand online this year.
"Our long-standing partnership with [TV stylist] Gok Wan and the more recent collaboration with the Admiral men's sportswear brand are proving popular," Sainsbury's said. "Our successful back to school campaign...consolidated our position as the fourth biggest schoolwear retailer by volume. After a successful regional trial, Tu online was rolled out nationwide this summer. Initial sales exceeded our estimates and over 80% of customers are collecting their orders from more than 700 in-store collection points."
The retailer said it is focused on "maximising the strength" of its non-food business by growing its clothing and general merchandise presence in stores, changing visual merchandising more frequently and emphasising its quality and design-led approach in clothing.
"At present, there are only 126 stores that offer our full non-food range, so the opportunities for growth are significant," Sainsbury's said in its update.
The success of the clothing division appeared to be the shining light in the first half as the retailer revealed a 17% drop in underlying pre-tax profit to GBP308m (US$315.4m) and a fall of 1.6% in like-for-like sales. Underlying group sales were down 2% to GBP13.6m. The news sent Sainsbury's share price down 2.09% to 266.90 pence in morning trading.
The retailer said the market remained particularly challenging, and cited food deflation and tough competition from discounters for a reduction in its market share to 16.5%.
Nonetheless, CEO Mike Coupe said the retailer was making "good progress" against the strategy it outlined a year ago, which has involved cutting prices and improving product quality and customer service. "I am confident we are making progress and we are looking forward to a successful Christmas," he added.
Sophie McCarthy, consultant at Conlumino, believes that despite a turbulent backdrop, Sainsbury's is continuing to invest in new opportunities and innovative concepts.
She notes: "While today's announcement further highlights the intense competitive pressures that Sainsbury's is encountering, it does appear to be on track for an improving performance."
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