2019's Tu Clothing sales up at Sainsbury's, but they plunge in lockdown
Fashion and general merchandise (GM) are dragging down the performance of supermarkets giant Sainsbury’s at present, but in the year to March 7, fashion sales managed a small rise.
The company released its preliminary full-year results on Thursday and said total group sales fell 0.1% to £32.394 billion. It generated profit before tax of £255 million, up from £202 million. Across the year, clothing sales rose only 1.2%, but that was better than GM, which fell 2.9%.
But more interesting was what's happening now and what it expects for the foreseeable future. The supermarkets giant (which is a major fashion retailer via its Tu Clothing line) said the coronavirus pandemic has had "a significant impact on our business since early March”.
And it has little clarity on what will happen in the future for now, although it has modelled a broad range of scenarios. Its base case assumes that lockdown restrictions will have eased by the end of Q1 (late June), but that the business will continue to be disrupted until the end of the first half (mid-September).
It also assumes consumer demand, particularly for GM and clothing, “will be impacted by weaker economic conditions thereafter”. Under its gloomy scenario, it’s expecting “a profit impact of over £500 million due to significant costs associated with protecting customers and colleagues, weaker fuel, general merchandise and clothing sales and lower financial services profitability,” although higher grocery sales should help to balance this out.
For now, the company’s supermarkets continue to operate, but it closed all of its 573 standalone Argos stores from 24 March with the Argos brand currently operating online. And it said that in recent weeks, it has seen “materially reduced clothing and general merchandise sales in Sainsbury's stores, reflecting different customer priorities and reduced stocks of clothing in stores as we have prioritised grocery deliveries”.
That can be seen clearly from its figures for the last quarter of its financial year and for the period after that. In the nine weeks to March 7, clothing sales rose 2.5%, but in the seven weeks to April 25, they fell 53%.
The sharp changes in clothing sales can also be seen in the firm’s weekly figures. For instance, in the week to February 29, clothing sales rose 12%, but the following week they dropped 9%. And that decline continued and grew every seven days with the week to April 18 seeing fashion down as much as 71%.
And the company expects a “significant continued sales declines while in lockdown, moderating through the remainder of the year towards low-double-digit percentage declines in H2”.
Meanwhile in GM, the group saw higher sales at Argos in the early days of the lockdown, “as customers equipped themselves for home working and spending more time in their homes”. But growth “has moderated in recent weeks following this early lockdown preparation activity”. In the nine weeks to March 7, GM sales fell 1.3% with Argos itself up 0.4%, counteracting the Sainsbury’s supermarkets 8.1% drop in GM. In the seven weeks after that, GM rose 3% with Argos up 9% but Sainsbury’s down 22%.
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