Sainsbury's halts talks on Nisa buyout

Sainsbury's to 'build on' Argos-eBay tie-up

13 September

Sainsbury's is seeking to take early advantage of its now-completed £1.4bn buyout of Argos owner Home Retail Group.

After the go-ahead for the deal was finally confirmed on 2 September, the firm has wasted no time in extending a successful trial that involved co-locating Argos concessions within its own supermarkets. Within three days, the store announced plans to open a further 30 such outlets by Christmas, says The Guardian, adding to the 20 that are already in place.

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There is talk of some of these units replacing standalone Argos stores nearby. Earlier this year, Sainsbury's confirmed that such consolidation could lead to 200 jobs being cut, although many employees would be offered new roles, while many more jobs would eventually be created as the chain expands.

In addition to these changes, five "mini" Habitat stores will also be launched within Sainsbury's supermarkets before the end of the year. The homewares brand previously had a tie-up with Homebase, a former sister company that was sold earlier this year by Home Retail to the Australian retailer Buntings.

Elsewhere, Sainsbury's is looking to build on the success of a tie-up between Argos and eBay that allows customers of the online auction site to collect orders at a number of its stores.

Retail Week says the group will open 200 click-and-collect points, at which customers will be able to pick up items bought through eBay, as well as from the store's own Tu clothing lines.

Mike Coupe, chief executive of Sainsbury's, said: "This is the start of an exciting new phase for Sainsbury's, Argos and Habitat. I am delighted to be able to quickly capitalise on the benefits of our combined group."

Coupe says that the new click-and-collect points are "a clear demonstration" of how the Argos acquisition will benefit customers, by "bringing them a broader range of quality goods and services whenever and wherever they want."

Sainsbury's gets green light for £1.3bn Argos buyout

22 September

Sainsbury's has been given a green light to press on with its buyout of Argos-owner Home Retail Group.

The Competition and Markets Authority will not pass the deal on for a more intense "phase two" investigation, which could have delayed the process by months, reports The Times.

Some had thought the crossover in non-food sectors – the tie-up will create the UK's largest seller of non-food products – would prompt the regulator to subject the transaction to greater scrutiny.

"This is an important step in the deal process," the two companies said in a joint statement.

"The combination of both businesses will create a multi-product, multi-channel proposition with fast delivery networks, giving customers what they want, whenever and wherever they want it."

Originally priced at around £1.4bn, the cash-and-shares deal now equates to a consideration of £1.3bn for Home Retail investors, thanks to a fall in Sainsbury's shares since it was first announced.

The quoted purchase price includes the proceeds of the sale of Homebase to Australian DIY chain Bunnings and a final dividend of 2.8p per share.

References to "fast delivery" networks in the statement is significant in that it both highlights one of the key rationales for the buyout and comes alongside a major development from Sainsbury's.

The supermarket has announced a trial that will see three London stores outsource online orders for home delivery to a 990-staff strong "dark store" warehouse in Bromley-by-Bow, in the east of the capital.

Importantly, this will allow it to offer a four to six-hour, same-day delivery service, notes the Telegraph, taking the fight to Amazon, which is also rolling out a same-day UK grocery service.

If the trial is successful, a similar service could be in place for 30 more stores by Christmas.

Sainsbury’s launched its online grocery business in 1999 and by 2013 sales had reached £1bn. Last year, sales grew by nearly 9 per cent.

Sainsbury's insists Argos deal will create 1,000 jobs

06 July

Sainsbury's has dismissed concerns that the changed economic climate in post-referendum Britain undermines its buyout case for Argos owner Home Retail Group.

The supermarket group also says that while between 400 and 600 head office jobs will be lost as a result of the merger, and hundreds of jobs will be put at risk in existing Argos stores, the deal will significantly enhance headcount, with a net 1,000 retail roles eventually being created.

Yesterday, the company published a 188-page prospectus on the cash-and-shares buyout, which the BBC reports had been valued at £1.4bn but is now priced at £1.3bn after a shares fall in the wake of the EU vote.

Despite the ongoing criticism from analysts that the strategy underpinning the purchase of Argos, which has struggled to improve modest earnings growth in recent years, Sainsbury's boss Mike Coupe says it remains "absolutely convinced by the strategic rationale".

Supporters of the deal have said it will enable Sainsbury's to broaden its offering, utilise excess store space and improve its delivery operation to stave off the looming threat from online giant Amazon.

In the document, the group estimates a reduction of "approximately 400 to 600 roles across corporate and support functions", reports The Guardian. It also states that 200 to 300 store jobs would be eliminated by plans to relocate Argos’s high street branches into Sainsbury's supermarkets.

However, it adds that many of these store staff would also move over – and that longer-term, there will be a "net increase of around 1,000 or more retail operations roles".

Speaking at the launch of the prospectus, Coupe added that it was "impossible" to "predict the future off ten days’ worth of data" since the referendum. He said there was a "danger that we’ll talk ourselves into a recession".

A major high street slowdown would be seen as negative for the merged entity, which would become the biggest non-foods retailer in the UK.

Sainsbury's ditches Netto to focus on Argos deal

05 July

Sainsbury's has pulled the plug on its nascent expansion into the booming discount grocery market, marking the second departure from the UK in six years for the Danish brand Netto.

The UK's second largest supermarket signed a deal two years ago with Dansk Supermarked Group with the intention of bringing Netto back to the Britain, four years after the Danish store's 200-store estate was sold to Asda. Soon after a trial was launched that saw 16 sites open across the north of England.

Now, despite saying the sites are trading "in line with expectations", Sainsbury's says they will be closed next month, the BBC reports.

"Netto needed to grow at pace and scale, requiring significant investment and the rapid expansion of the store estate", says Sainsbury's chief executive Mike Coupe. The store was not in a position to provide this in the current market.

Sainsbury's says it will write off its £20m investment in the trial and expects to incur a further £10m in wind-down costs. Around 400 staff will be affected, but many will be "re-deployed" across the business.

Coupe adds that the store will "instead focus on our core business and on the opportunities we will have following our proposed acquisition of [Argos owner] Home Retail Group."

Analysts believe the buyout of Home Retail, which will see hundreds more Argos concessions located within Sainsbury's stores and a massive roll-out of grocery deliveries to combat the rise of Amazon, is the real reason for the Netto deal being ditched.

"If approved by competition regulators, the £1.4bn takeover… will leave the Sainsbury's balance sheet more stretched and its management with the task of delivering on a strategy that many in the City criticise or freely admit that they do not understand," says the Daily Telegraph's Christopher Williams.

The worry for many investors now is whether the big gamble on Argos will pay off. Williams adds: "There remains a feeling that if the answer to Sainsbury's malady is Argos, then its condition must be much more serious than feared."

Sainsbury's top the charts for vinyl record sales

09 June

Buying a vinyl album once "might have meant trips to the record shop… these days it is as likely to take you to Sainsbury’s", says The Times.

Sales of vinyl have been resurgent, growing by more than 60 per cent in 2015 and by 70 per cent in the first quarter of 2016, notes City AM, figures which prompted the supermarket to return to selling records earlier this year, following a 25-year hiatus.

It seems to have been a hit move. According to first-quarter results published yesterday, Sainsbury's has already amassed a market share of eight per cent, making it the largest seller of vinyl in the UK.

The group also announced that its network of smaller convenience stores enjoyed growth of more than six per cent, online sales jumped eight per cent and clothing and general merchandise sales both rose five per cent.

However, this failed to prevent an overall like-for-like decline of 0.8 per cent, or one per cent excluding fuel.

Nevertheless, the nuggets of positive growth suggest a degree of success for chief executive Mike Coupe's strategy of widening his firm's horizons, culminating in the £1.4bn buyout of Argos that will significantly enhance the grocer's non-food and delivery offering.

At a time when food price deflation is running at around 1.5 per cent, even the overall sales decline is not a disaster: it was well ahead of analyst expectations for a fall of as much as two per cent or more.

Sainsbury's shares wobbled through Wednesday but ultimately closed 1.6 per cent higher at 250.7p. The stock was 0.7 per cent higher again this morning to 252.2p, despite a sharp fall on the wider FTSE 100.