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Comment: Sainsbury’s supermarket sweep could shake up fashion market

Jill Geoghegan

There is never a dull moment in the world of retail, and this week was no exception, as Sainsbury’s made the surprise announcement of its intention to buy a majority stake in supermarket rival Asda.

The merger would create the UK’s biggest supermarket and have implications for fashion. Retail veteran George Davies launched George at Asda in 1990 –  it was the first supermarket fashion brand. Tesco’s Florence & Fred, as it was then known, followed  in 2001, and Sainsbury’s Tu in 2004. These brands revolutionised the value end of the industry, and now account for £3.1bn of annual clothing sales in the UK, Kantar Worldpanel figures show. Indeed, Asda’s George is ranked as the second-biggest clothing retailer in the UK by volume, while Sainsbury’s Tu is sixth.

Tu premium

Tu Premium

Following the deal, both parties have stated that the brands will remain separate, but the combined company would have a 5.6% share (2.1% Tu and 3.5% George, according to Global Data) of the UK clothing market in 2018, making it a veritable powerhouse. Rival value players, such as Primark, and high street stalwarts, such as Marks & Spencer, will both be keeping a very close eye on the potential new giant.

However, despite the opportunities, there are sure to be some casualties and complications along the way. Suppliers to George and Tu are likely to be concerned about margins. In an already difficult trading climate, consolidation could squeeze suppliers even more, and there could effectively be one less buyer in the market.

Although Sainsbury’s CEO Mike Coupe was adamant that no in-store redundancies would be made as a result of the deal, the Competition and Markets Authority is almost certain to force store closures if the proposed takeover does gain approval.

Sainsbury’s also alluded to £500m of cost-saving “synergies”. Within George and Tu, there is sure to be an overlap in design and buying functions, as well as central finance and operating divisions. Restructuring – and job losses – could be on the horizon for both.

As more details of the proposed merger are ironed out over the coming months, the ramifications will be wide-reaching – not only for the teams at George and Tu, but also the wider fashion industry and beyond.

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