Sainsbury’s hopes to emulate John Lewis and M&S with Argos bid

Sainsbury’s chief executive Mike Coupe said its move to acquire Argos-owner Home Retail Group would give it a “non-food business on the scale of Amazon and John Lewis” as the retailer sees its Christmas sales fall.

Sainsbury’s has already had a £1bn bid for Home Retail Group turned down and has until 2 February to make a second offer. On a media call this morning (13 January), Coupe outlined the strategic thinking behind the deal, suggesting another bid is imminent.

Coupe said there are opportunities to align ranges from Argos and Sainsbury’s – such as the Habitat and Tu brands. He also highlighted that the move would secure “even greater brand loyalty” with both retailers serving 40% of the UK population.

“It is clear that when you have a greater non-food business, that generates greater sales in your food business and vice versa,” said Coupe. “If the deal goes ahead it will create a non-food business at the scale of John Lewis, Amazon or M&S. It will be a £6bn business.”

In particular, he said the move will ensure Sainsbury’s can accelerate its click and collect proposition and that the deal would also result in even more Argos sites.

He explained: “Over half of Argos stores have leases with less than five years. We can bring some of these stores into our existing Sainsbury’s real estate and create a much larger volume of Argos sites.”

And should the deal not be completed, Coupe said he’d “never say never” in bidding to acquire similar propositions to the Home Retail Group, adding: “We are constantly looking at opportunities for acquisitions that can help us serve the modern needs of customers.”

Mixed results at Christmas

Sainsbury's cat
Sainsbury’s has credited its Christmas ad campaign for strong festive sales

Sainsbury’s saw a 0.4% fall in like-for-like sales for the three months to 9 January compared with a year earlier. That performance is slightly ahead of City estimates of a 0.6% fall but still behind big four rival Morrisons and its surprise 0.2% growth.

Sainsbury’s credited its Christmas ad campaign featuring author Judith Kerr’s feline character Mog for helping to provide a sales boost. The supermarket said Mog’s Christmas Calamity ad was a “huge success” after it secured nearly 37 million online views.

Coupe said the 0.4% decline in third quarter sales was an improvement on the previous two quarters and that he expects the second half of the financial year to be better than the first six months.

Total sales — which include sales contributed by new stores opened in the past year — rose 0.8%. Sainsbury’s has been expanding into small, convenience stores and opened a further 16 outlets during the third quarter.

The UK’s second biggest supermarket also talked up its ecommerce performance, with online grocery sales up by just under 10% and overall orders up by 15%.

“We had a record week in the quarter, delivering over 289,000 online orders. We now have 101 click and collect sites nationwide,” said Coupe.

“We have traded well during the festive period in a highly competitive market. As a result we have seen our market share grow in the quarter and were the only big four supermarket to do so,” he added, citing Kantar Worldpanel market share figures.