Sainsbury’s axes stores as it embarks on £500m savings plan

Sainsbury’s has announced a shake-up of its store estate as part of plans to save £500 million across the next five years.

The retailer announced the closure of up to 125 Sainsbury’s and Argos stores in its second quarter trading statement, with plans to move the majority of the closing Argos stores into the Sainsbury’s estate, while also opening 110 new convenience stores. Sainsbury’s said it expects the closures to deliver an ongoing net operating profit benefit of around £20 million per year.   

Like-for-likes for the group fell 0.2% over the 12 week period to 21 September, while grocery sales increased 0.6%. General merchandise decreased 2%, while clothing increased 3.3%.

“Sales momentum was stronger in all areas and we further improved our performance relative to our competitors, particularly in grocery. We have focused on reducing prices on every day food and grocery products and expanding our range of value brands, which have been very popular with customers. At the same time, we are investing significantly in our supermarkets, driving consistent improvements to service and availability,” said CEO, Mike Coupe.

“Argos continued to grow market share in key categories, but sales were impacted by reduced promotional activity and the timing of new product releases in gaming and toys. Clothing sales were boosted by clearance activity and strong online growth and Tu continued to grow market share. Financial services sales were in line with expectations.”

The retailer expects half-year underlying profit before tax to dip by around £50 million year-on-year due to the phasing of cost savings, higher marketing spend and unseasonable weather. It expects the second half to pick up and remains on track to deliver full-year profits as per expectations.

Rebecca Crook, chief growth officer at Somo, praised Sainsbury's efforts to tighten up its store estate: “The cost of premises on today’s high streets is one of the biggest burdens on the current dismal retail landscape," she said.

"The news today that Argos stores will be closing comes as no real surprise; however they are in a great position to be able to move further into Sainsbury supermarkets, meaning they have regular footfall and Sainsburys also extends their offer.

"It’s a good move by the supermarket giant, who are proving to be trialling different ideas and initiatives to suit the changing consumer behaviours – despite the recent decision to reinstall tills in their till-less London store, they are actively looking at ways to try and use technology to suit the shopping trends of customers; looking to make life easier and convenient for customers and rather than standing still hoping for the best, which we know with the news of Thomas Cook this week doesn’t work out well.”