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Sainsbury's sales expected to be hit by Argos deal and supermarket price war

Published 23/09/2016

Sainsbury's will increase the number of Argos concessions from 13 to 30
Sainsbury's will increase the number of Argos concessions from 13 to 30

Sainsbury's is forecast to report another dip in sales when it unveils second quarter results next week, with the City also looking for any further news of cost savings linked to its acquisition of Argos.

Analysts at Deutsche Bank are pencilling in a 1.9% fall in like-for-like sales for the second quarter amid a brutal supermarket price war and disruption linked to the deal.

Deutsche's Niamh McSherry said: "While consumer spend does not appear to have been impacted by Brexit, it's likely that employee engagement and, hence, business performance suffered in the period of uncertainty pre-completion of the (Argos) acquisition."

The supermarket, which shelled out £1.4 billion taking over Argos and Habitat owner Home Retail Group, is also expected to shed further light on the next phase of the tie-up on Wednesday.

Earlier this month, Sainsbury's boss Mike Coupe said he is to more than double the number of Argos outlets in supermarkets by Christmas and introduce home furnishings retailer Habitat into its stores for the first time.

Sainsbury's will increase the number of Argos concessions from 13 to 30 and open five Mini Habitat stores within its supermarkets over the coming months.

Graham Spooner, investment research analyst at The Share Centre, said: "After a tough period there has been slightly better news in the supermarket sector recently and investors will be hoping for further signs that Sainsbury's has managed to arrest its fall in sales.

"However, competition amongst supermarkets remains high, leading to a tough trading environment, which is likely to limit good news. An update on the Home Retail acquisition and any further cost savings will be worth noting."

The combination of Sainsbury's and Argos will create one of the biggest non-food retailers in the UK with more than 2,000 stores and 195,000 staff.

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