J Sainsbury PLC (LSE:SBRY) should benefit in coming years from shutting its Irish Argos stores, according to Shore Capital analysts, although this is unlikely to show until 2025.
Some 34 Argos stores will close in the coming months after Sainsbury’s said they were unviable and that the money would “be better invested in other parts" of its business, threatening almost 600 jobs.
Shorecap analyst Clive Black said the closure of stores would reduce “any potential losses,” given that Argos “somewhat underinvested” in its Irish business.
Black also suggested the Irish wing, which posted a pre-tax loss of €13mln in 2022, likely suffered from a lack of parent Sainsbury’s supermarkets to complement it.
“While very disappointing for the people involved, we can understand the decision by Argos to exit the Irish market,” Black said.
“A potentially small financial year 2025 benefit to group trading profit may ensue whilst more importantly there is not the need to commit capital to this market where one senses that confidence […] appears low.”
Sainsbury’s also made headlines on Thursday as LloydsPharmacy announced it would close all of its outlets in the supermarkets.
It cited “changing market conditions” as a key in the decision which will see the concessions closed throughout the year, ending a £125mln deal signed in 2015.
Shorecap added: “There is clearly a risk to a superstore from losing the footfall associated with a pharmacy presence, but the impact remains to be seen”.
Shares in Sainsbury were up 0.5% at 242.4p today.