Sainsbury’s profits plunge 15 percent after failed Asda takeover

Cornelia Mascio
Novembre 9, 2019

Mike Coupe, chief executive of the leading United Kingdom supermarket group (SBRY.L), also warned Brexit uncertainty "weighs heavily" on its customers and said election day would hit supermarket sales.

In the 28 weeks to September 21st, Sainsbury's saw underlying retail sales (including Value-Added Tax, excluding fuel) decrease by -0.6%, driven by declines in general merchandise and clothing sales.

Sainsbury's last month revealed a strategic plan to close 125 stores and replace these with 110 convenience stores and inserting 80 Argos outlets inside the bigger stores, which should cost up to £270mln but lead to savings of £500mln over the next five years.

The supermarket blamed poor weather compared with last year for a 0.1% fall in grocery sales over the half year.

The 150-year old group did, however, forecast on Thursday that second half profits would benefit from the annualisation of last year's staff wage increase and a normalisation of marketing costs and weather comparatives - implying it was on track to make analysts' profit consensus for the full 2019-20 year.

Group sales fell 0.2% to £16.86 billion, with like-for-like sales, excluding fuel, down 1.0%.

It saw its underlying profits slide 15% in the first half of the year, but they were down 92% when the cost of a write-down of its store estate is included.

Sainsbury's has insisted that its strategy to trim prices and improve product availability is working despite the supermarket giant's sales flatlining in the first half. All Argos shops were expected to be converted to a digital format by the end of this year.

"We have set out our plan to create one multi brand, multi-channel business". You get the feeling that it is still trying to find its feet since the failed merger with Asda.

He said the retailer "now has to decide how to differentiate itself in a notoriously competitive sector".

The company said that underlying profit-the company's preferred metric which excludes exceptional costs-was GBP238 million, a fall of GBP41 million from the prior year's period. "At the same time, it is looking to reduce net debt further and indeed has reduced the figure by 5% year-on-year, with an additional £300 million plus reduction pencilled in over the course of the year". "In the meantime, however, Sainsbury remains somewhat under the cosh". "The integration of Argos has been a step in a new direction, but despite the cross-selling potential, it hasn't been enough to boost overall sales".

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