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Sainsbury's expected to increase offer for Argos as deadline looms

Sainsbury's store

Earlier today Sainsbury’s announced its first quarterly increase in like for like sales in over two years, adding to evidence that their business is starting to stabilise.

During Q4 (nine weeks to 12 March), the group’s total sales were up 1.2% whilst like-for-like sales increased 0.1%, ahead of analysts’ expectations. The figure compared to a 0.4% fall in Q3 and 1.6% decline during H1 of their financial year. 

Sainsbury’s Chief Executive, Mike Coupe said: “We have delivered a strong performance this quarter. Our supermarkets recorded both like-for-like transaction and volume growth and we continue to exceed our internal metrics for service and availability. We also maintained our market share in the quarter.”

Sainsbury's will be looking to drum up a positive picture of their business before this Friday's deadline for formalising offers for Home Retail Group. The supermarket said it would create a "world-leading" retailer bigger than rivals John Lewis and Amazon UK when it originally offered £1.3bn for Home Retail Group in February. 

However, South African retailer Steinhoff has attempted to gatecrash the supermarket's deal, when they make an offer of £1.4bn in cash. Steinhoff - which owns UK furniture retailer Harveys and Bensons for Beds, is listed on the Frankfurt and South African stock markets.

Home Retail chief executive John Walden has branded the last few weeks an "eventful period" for the company, which saw it sell off its DIY chain Homebase to Australian conglomerate Wesfarmers for £340m in February.

Sainsbury's said if its bid for Home Retail Group is approved, it would trigger cost savings of about £120m in the third full year after the deal is complete.

It is estimated that around half the savings would come from relocating Argos stores into Sainsbury's supermarkets as concessions, as well as launching new Argos concessions and expanding Sainsbury's click and collect service.

See the full results publication here

Analyst View

Hannah Maundrell, editor in chief at www.money.co.uk, gave us her view: 

“This could be a sign the supermarkets are finally learning we don't want the wool pulled over our eyes when we shop. I'm pleased Sainsbury's are attributing their positive results in part to a conscious shift away from purchases that get us stocking up on goods we don't really want. Lowering pricing on everyday goods is far easier to get your head around.

A slick online delivery service has helped them so far, but it's vital they perfect it before Amazon gets in on the grocery action. Home delivery is where Sainsbury's has a clear opportunity to win back custom from the bargain end of the supermarket spectrum. Good quality produce with clear pricing supported by decent customer service is what will reel shoppers back in.” 

Source: Insight DIY Team.

15 March 2016

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