Tu clothing’s bright sales, bright future, fail to mask Sainsbury’s woes with first loss in decade

OK, so UK supermarket Sainsbury’s results were bad and its shares fell yesterday as a result. They were so bad that the supermarket chain slumped to a much-publicised full-year loss for the first time in a decade, a casualty of the high street grocery price war.

But the picture was so much brighter away from the food shelves with its general merchandise, and in particular its successful £880m a year Tu clothing offer, “performing strongly” with combined sales up over 9%.

Reading deeper into yesterday’s long financial statement away from those grocery woes, there was much talk of “strong foundations” and growth in its multi-channel offer, with clothing and general merchandise central, as the retailer battles through an “unprecedented industry change” in the UK supermarket sector.

Calling it a time of “significant opportunities to grow our business”, CEO Mike Coupe, noted clothing and general merchandise… “have performed well over the past 12 months. We have a significant ambition to grow these [profitable] areas over the coming years.”

He said they both “continue to show excellent growth and strong potential… We see a firm correlation between increased loyalty and spend across our whole offer when customers buy into these categories.”

Delving deeper, the retailer said: “Our strategy for growth focuses on increasing our non-food presence in stores, changing the visual merchandising more frequently and emphasising our quality and design-led approach in clothing, cookware, homeware and seasonal products – categories that customers tell us matter most to them.”

The ranges are currently stocked in nearly 430 of its supermarkets, it noted.

“We have seen Tu clothing sales grow to over £800m this year and we are currently the UK’s seventh largest clothing retailer by volume and 10th largest by value,” Coupe stressed.

“We bring our customers new Tu collections every six weeks and our focus on being a destination for ‘high street style at supermarket prices’ and our successful partnership with [celebrity] Gok Wan have helped us increase market share and drive double-digit sales growth.”

He added: “We marked Tu’s 10th birthday in September with our largest-ever fashion collection, and we launched our 16th collection with Gok in February.”

The retailer also said its customers are shopping its childrenswear ranges more frequently and it remains the sixth largest childrenswear retailer by volume and eighth by value.

Online, Sainsbury’s also expects a full rollout of clothing this year after trails had been extended to a number of regions across the UK, including London and the South East.

And now, back to the not-so-good news: The retailer also revealed Wednesday a £2m loss for the year to March, compared to an £98m profit for the prior year. Once one-off items are stripped out (£53m, including a £28m provision to cover onerous property leases) underlying profits were down 15% to £81m.
Same-store sales fell 1.9% during the year as total sales fell 0.7% to £3.8bn.

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