Sainsbury's-Asda merger would create general merchandise powerhouse - analyst

If Sainsbury’s manages to clear all the regularity hurdles for its proposed takeover of/merger with rival Asda, it could create a “general merchandise powerhouse,” an analyst said on Tuesday.



Asda

The merger, “if consummated, would create a general merchandise arm that would leapfrog current [homewares] market leader Dunelm,” GlobalData’s lead analysts Emily Stella said. 

But the group, which would include the Argos and Habitat ops that Sainsbury’s acquired in 2016, won’t only have a huge presence in homewares, as it would also own both the expanding Sainsbury’s Tu fashion offer and the George brand owned by Asda.

It would mean the combined company being responsible for a huge chunk of the products UK consumers wear/carry, and that they use in their homes.

At the moment, the UK’s competition and markets authority is investigating any overlap between Sainsbury’s and Asda in the supply of groceries, fuel and homewares, but it doesn’t seem to be worried about fashion, because of the huge amount of competition in the fashion sector at present. But the fact that the group would overtake Dunelm to become the UK’s largest homewares retailers is an issue.

Stella added: “Benefitting from economies of scale, Sainsbury’s group would be able to offer lower prices helping it match product pricing at value merchandisers such as B&M and The Range – and potentially giving Sainsbury’s group a competitive advantage over these harder-to-reach retailers. Other grocers, mid-market players such as Marks & Spencer and Next, and higher-priced specialists, such as Dunelm and John Lewis, would also suffer.”

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