Sainsbury’s is to close up to 70 Argos stores and replace them with outlets inside its supermarkets.
The closures are part of a reorganisation of the retailer’s store portfolio that will also involve the closure of up to 15 supermarkets and 40 convenience stores. The group is also likely to close up to half of its 12 data centres, which house servers and other storage facilities for the group’s IT, as it merges technology operations for Sainsbury’s and Argos.
But 10 new supermarkets will be opened and more than 100 new convenience stores are planned, including several small takeaway food sites and more than 10 small local stores with enough room to house an Argos or pharmacy. Eighty new Argos outlets will be opened inside Sainsbury’s supermarkets.
Sainsbury’s said it aimed to redeploy as many affected staff as possible but the reorganisation is likely to cost hundreds of jobs. The grocer also revealed a further fall in sales as it battles to fend off rising competition from discounters including Aldi, Lidl and B&M.
The supermarket group said it was aiming to reduce costs by £500m over five years and cut debts by £750m as a result of rejigging its store estate.
As part of its effort to reduce costs, Sainsbury’s Bank will also stop selling mortgages. Home loan sales would stop immediately, the company said, as it wanted to halt capital injections into the bank by next year. The company, which began offering mortgages in 2017, has pumped hundreds of millions of pounds into the bank since taking full ownership of it in 2014.
Tesco and Which? pulled out of the mortgage market in May during a price war in the sector, which has been hit by a slowdown in the housing market.
The Sainsbury’s chief executive, Mike Coupe, said the savings would give the company “more resilience in what we all agree is a very challenging market”.
He said Sainsbury’s would partly use the spare cash to fund price cuts that would narrow the gap with the discounters and Tesco.
Those efforts include phasing out Sainsbury’s cheapest own-label range Basics, which it launched in 2005.
By March, the cut-price brand will be replaced by 200 products under 13 in-house labels including Stamford Street ready meals, Mary Ann’s Dairy and Greengrocer fruit and veg. The brands, most of which have already been tested in stores, are similar to Tesco’s controversial farm brands, which Sainsbury’s said its products would match on price.
Sainsbury’s said sales at established stores fell 0.2%, excluding fuel, in the last three months, an improvement on a 1.6% fall in the previous quarter. Grocery sales rose 0.6%, the first sign of growth in 2019, while clothing sales rose 3.3%, the first increase in a year. General merchandise sales fell by 2%.
The company said pretax profits in the first half of its financial year would be £50m lower partly because of unseasonable weather and higher marketing costs. The group nevertheless expects to deliver full-year profits in line with expectations.
Coupe said: “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 everyday 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.
“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.”
He said clothing sales had been boosted by clearance sales and strong online growth and that its Tu clothing brand continued to take market share.
