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Sainsbury's to close 60 Argos stores as profit set to dip

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Sainsbury's will close 60-70 Argos stores as it adds more of the catalogue shop's outlets to its own stores.

The company will open about 80 Argos concessions in its supermarkets, it said in a trading update.

The move comes as the UK's second largest supermarket chain warned investors that profit for the six months to 21 September will dip.

It blamed bad weather and higher marketing costs for the forecast £50m drop on the period last year.

The supermarket will also cease new mortgage sales as part of a plan to make its financial services division more profitable.

Earlier this month, larger rival Tesco sold its entire mortgage portfolio to Lloyds, exiting a very competitive market. Low interest rates have made mortgages less profitable for lenders.

Value brands

Sainsbury's reported sales for the three months to 21 September for stores open at least a year and excluding fuel dropped 0.2%. Clothing and food sales rose, while household goods sales dropped 2%.

The firm will open 110 new convenience stores and close 30-40, it said. A fall in its pension deficit means it can reduce its contributions by £50m a year.

"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," said Chief Executive Mike Coupe. "At the same time, we are investing significantly in our supermarkets."

Fewer items on promotion and fewer new video game and toy releases hurt sales at Argos, he said, while Sainsbury's Tu brand of clothing performed well.

Source - BBC News

Photo © Graham Hogg (cc-by-sa/2.0)

About the author

Philip Scott

Head of Equities, Director

Philip has worked as a Private Client Stockbroker for nearly 20 years, commencing his career in Operations with Rensburg Sheppards (now part of Investec plc) before spending 9 years with Killik & Co advising on and directly managing portfolios. He joined SI Capital in 2006 to head up the Private Client Advisory desk.

Philip is a regular contributor to local media commenting on stock market dynamics and is a Chartered Member of the Chartered Institute for Securities & Investment (MCSI). His RDR qualification gained special recognitionfrom the CISI for achieving the highest combined pass mark in the country for the Investment Advice Diploma in 2012.

“At SI Capital I enjoy being part of a talented team who collectively share the same desire to provide excellence in service.  My focus is to ensure that each client receives effective and optimal management of their assets.”

Philip lives locally, is married with 2 daughters and is an avid sports fan (if now predominantly from the sidelines).  His other interests include music and film.

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