Sainsbury’s and Argos customers spent twice as much online in the first half of its financial year as they did a year earlier. By September, almost 40% of group sales took place online, up from about 19% a year earlier. Now the supermarket group has responded to that online shift with plans to close 420 standalone Argos shops, up to 80 branches of Sainsbury’s and all of its supermarket deli, meat and fish counters. In all, about 3,500 jobs will be lost – although the business expects to have 6,000 more members of staff overall by the end of the year.
The retail group, which includes Sainsbury’s, Argos, Habitat and Tu, saw digital sales grow by 117% to £5.8bn in the first half of the year. Within that, online grocery sales were up by 102%, while online clothing sales grew by 75% – although overall clothing sales fell by 18.3%.
The update came as Sainsbury’s today reported group sales of £14.9bn in the 28 weeks to September 19, down by 1.1% from £15.1bn at the same time last year. Retail sales rose by 7.1% as grocery (+8.2%) and general merchandise (+7.4%) sales grew, but fuel sales were down by 44.6% during the half-year. Argos sales grew by nearly 11% despite store closures, with a 78% increase in sales made online and delivered to home or collected from a branch of Argos within Sainsbury’s. At Sainsbury’s, in-store sales grew by 3.2% in total in supermarkets, including branches of Argos within supermarkets, while sales at convenience stores fell by 8% in total, partly because 26 were shut temporarily.
But at the bottom line, Sainsbury’s reported a pre-tax loss of £137m, down from a pre-tax profit of £9m a year earlier, after one-off costs of £438m related to Argos store closures and including a £214m writedown in the value of assets and property, including shops.
Now the group plans to close 420 standalone branches of Argos by March 2024, leaving about 100 remaining. By the same date, it aims to have up to 150 more Argos stores within branches of Sainsbury’s, and to add between 150 and 200 more Argos collection points in supermarkets and convenience stores, so that every supermarket will have one or the other of those.
Between 15 and 20 Sainsbury’s supermarkets and between 50 and 60 convenience stores will also close or be sold, while deli, meat and fish counters within Sainsbury’s supermarkets will close. The closures mean 3,500 jobs could be cut.
The group as a whole, however, expects to have 6,000 more members of staff by the end of the current financial year. It will build a total of 32 local fulfilment centres to operate Argos’ fast-track delivery operations, delivering both to customers’ homes and to Argos stores and collection points. At the same time Habitat will become the main Argos and Sainsbury’s home and furniture brand.
The Argos and Sainsbury’s supply chain and logistics will move into a single network at the same time, with a number of existing depots set to close.
Sainsbury’s chief executive Simon Roberts said: “Covid-19 has accelerated a number of shifts in our industry. Investments over recent years in digital and technology have laid the foundations for us to flex and adapt quickly as customers needed to shop differently. Around 19% of our sales were digital this time last year and nearly 40% of our sales are digital today.”
The closure of Argos standalone stores comes despite a surge in sales at the retail brand. It has gained more than 2m new customers and seen strong sales in the last six months – although the growth came online rather than in store – with 583 stores closed during lockdown. “Over the next three years we will make Argos and simpler, more efficient and more profitable business while still offering customers great convenience and value and improving availability,” said Roberts.
He said the group expected to be able to offer alternative jobs to most of the staff who have been affected by today’s job losses.
News of the job cuts comes a day after the John Lewis Partnership said it would cut 1,500 head office jobs by April 2021. The retail group, which owns John Lewis and Waitrose, says it will simplify the way it works and remove management layers, saving an extra £50m as it looks to cut costs of £300m a year. The news follows last month’s announcement of a £1bn investment in customer service and the online and store experience.
Argos and John Lewis are ranked Elite retailers, for their ecommerce and multichannel performance, in RXUK Top500 research, while Sainsbury’s is ranked Leading.