Sainsbury's preliminary results for 2023/2024 (52 weeks ended 2 March 2024) highlighted its strength in grocery over the last year with sales up 9.4%, however GlobalData retail analyst Eleanor Simpson-Gould noted its clothing proposition is being impacted "most severely" with a 6.4% decline for the financial year.
The retailer admitted Tu clothing has continued to "maintain a disciplined trading approach" and it is making "deliberate choices" about the products and services that sit alongside its core food offer.
Sainsbury's overall group sales were up 3.4% year on year to £36.3bn ($45.46bn) from £35.2bn and its retail sales excluding fuel were up 6.8% to £30.6bn.
In regards to its apparel proposition, it said: "Lower Tu clothing sales in the year in part reflected a disciplined trading approach, with good stock management protecting profitability in a seasonally weak and promotionally-driven market. However, there were also some disappointing range performances and in the fourth quarter we experienced availability challenges on some core lines, both of which are being addressed in plans for the year ahead."
Sainsbury's explained its ambition is to deliver more food choice to more customers as it noted that currently only 15% of its grocery stores carry its full food range.
To do this, it plans to bring more of its range to more customers by re-allocating space currently used for general merchandise and clothing to food.
The retailer said: "We will focus on around 180 of our highest potential stores over the next three years."
Sainsbury's also shared that its general merchandise and clothing inside its stores will become more aligned to customers’ grocery missions in future in a bid to ensure ranges are "more relevant and desirable".
Simpson-Gould pointed out that while Sainsbury’s outperformed the food and grocery market in 2023 (+8.3%), it continues to struggle in its general merchandise and clothing categories with both sectors failing to provide positive growth past the first quarter.
She added: "The grocer’s Food First strategy, launched in November 2020, has correctly been replaced with the Next Level Sainsbury’s strategy update, which encapsulates a wider focus on retaining momentum in grocery sales and addressing the problem child of its non-food proposition, but will require adept and rapid roll out to provide positive sales momentum to counter declines in food and grocery sales expected in Sainsbury’s first half."
General merchandise (including Argos) declined 0.5%, with Simpson-Gould stating it suffered particularly poor growth in Q4 where sales fell 5.6%.
She believes that despite the continued absorption of Argos standalone stores into Sainsbury’s formats, Sainsbury’s is yet to find the winning formula to secure sustained sales momentum, as customers continue to prioritise spend on essential goods and services as opposed to categories such as clothing.
Simpson-Gould added: "With food sales growth now receding, Sainsbury’s Next Level strategy proposition must be rolled out swiftly. The grocer has positioned Argos as a core pillar to drive non-essential category growth by 2027, recognising the poor frequency of purchase rate from customers, it must ensure that promises to improve range and convenience are followed through before the end of this new financial year to fend off competition from the likes of Dunelm and Amazon."
Most critically, she concluded: "In this new strategy update are plans to enhance Sainsbury’s non-food categories through tailored ranges to local customer shopping journeys, enhanced visual merchandising and a tightening focus on ranges. By reducing and reformatting its general merchandise and clothing store space to prioritise full food range expansion, this new strategy will require informed and agile merchandising range reviews to ensure that further sales declines are not incurred."
