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Sainsbury's sales and profits fall amid price cuts Sainsbury's sales and profits fall amid price cuts
(35 minutes later)
Sainsbury’s has revealed a 14% drop in annual pretax profits after it was forced to make price cuts to compete with the rise of the discounters.Sainsbury’s has revealed a 14% drop in annual pretax profits after it was forced to make price cuts to compete with the rise of the discounters.
Sales fell 1.1% to £25.8bn in the year to 12 March and underlying profits slid to £587m, higher than the £571m predicted by analysts, as the company said it had maintained market share in a “competitive, deflationary environment”.Sales fell 1.1% to £25.8bn in the year to 12 March and underlying profits slid to £587m, higher than the £571m predicted by analysts, as the company said it had maintained market share in a “competitive, deflationary environment”.
The retailer was boosted by an 8.5% rise in clothing sales and nearly 9% rise in online sales, as well as more than 9% growth at its convenience stores as it opened 69 more Sainsbury’s Local outlets. In contrast, sales at supermarkets fell by 1.6%.The retailer was boosted by an 8.5% rise in clothing sales and nearly 9% rise in online sales, as well as more than 9% growth at its convenience stores as it opened 69 more Sainsbury’s Local outlets. In contrast, sales at supermarkets fell by 1.6%.
Mike Coupe, chief executive of Sainsbury’s, said the supermarket was making “good progress” in a challenging market. Mike Coupe, chief executive of Sainsbury’s, said the supermarket was making good progress in a challenging market.
Including one-off items such as property write-downs, Sainsbury’s returned to the black, booking a profit of £548m after a £72m loss last year. The company booked £101m in profits from the sale of property but also spent £59m on improving systems at its bank and £15m on costs relating to its planned acquisition of Home Retail Group, the owner of Argos.Including one-off items such as property write-downs, Sainsbury’s returned to the black, booking a profit of £548m after a £72m loss last year. The company booked £101m in profits from the sale of property but also spent £59m on improving systems at its bank and £15m on costs relating to its planned acquisition of Home Retail Group, the owner of Argos.
Sainsbury’s held its market share at 16.5% in the 12 weeks to 24 April compared to the same period a year before, according to the latest data from Kantar Worldpanel out on Wednesday morning, as it outperformed major rivals. The supermarket’s sales were down 0.4%, the first fall this year, according to Kantar.Sainsbury’s held its market share at 16.5% in the 12 weeks to 24 April compared to the same period a year before, according to the latest data from Kantar Worldpanel out on Wednesday morning, as it outperformed major rivals. The supermarket’s sales were down 0.4%, the first fall this year, according to Kantar.
But sales at Asda slumped 5.1%, while sales at Morrisons, which has sold off its convenience store chain, slipped by 2.6% and Tesco’s sales were down 1.3% over the period. In contrast, discounter Aldi increased sales by 12.5% and Lidl by 15.4%. Overall, the grocery market grew by just 0.1%, a one percentage point slowdown from the figure reported last month, as prices fell by 1.5%. But sales at Asda slumped 5.1%, while sales at Morrisons, which has sold off its convenience store chain, slipped by 2.6% and Tesco’s sales were down 1.3% over the period. In contrast, discounter Aldi increased sales by 12.5% and Lidl by 15.4%. Overall, the grocery market grew by just 0.1%, a one percentage point slowdown from the figure reported last month, and prices fell by 1.5%.
Coupe said that it was difficult to assess whether the Kantar figures reflected a broader consumer slowdown was on the cards or whether shoppers were just reacting to an early Easter accompanied by chillier and wetter weather this year than last. Coupe said it was difficult to assess whether the Kantar figures presaged a broader consumer slowdown or whether shoppers were just reacting to an early Easter accompanied by chillier and wetter weather.
But he warned that shoppers would continue to buy less items in supermarkets and turn increasingly to convenience stores, online and discounters. But he warned that shoppers would continue to buy fewer items in supermarkets and turn increasingly to convenience stores, online and discounters.
“The UK food retail landscape is changing rapidly,” he said, adding later: “Retailing doesn’t stand still and we need to challenge the business to move with the time. That is quite a significant rationale in acquiring Argos.”“The UK food retail landscape is changing rapidly,” he said, adding later: “Retailing doesn’t stand still and we need to challenge the business to move with the time. That is quite a significant rationale in acquiring Argos.”
Sainsbury’s is expecting to complete the £1.4bn takeover of Argos’s parent Home Retail Group in the autumn and Coupe refused to be drawn on further details of his plans for the company. Sainsbury’s is expecting to complete the £1.4bn takeover of Argos’s parent, Home Retail Group, in the autumn but Coupe refused to be drawn on further details of his plans for the company.
But he said the acquisition would put Sainsbury’s “at the sweet spot of where customers are moving to.” However he said the acquisition would put Sainsbury’s “at the sweet spot of where customers are moving to.”
Sainsbury’s said sales at established stores slid by 0.9% for the year, but trading has been on an improving trend with the supermarket revealing its first quarter of growth in more than two years in the final three months of its financial year.Sainsbury’s said sales at established stores slid by 0.9% for the year, but trading has been on an improving trend with the supermarket revealing its first quarter of growth in more than two years in the final three months of its financial year.
Coupe said: “It remains a challenging market. We are expecting deflation to continue through the summer and clearly that has a significant impact on our sales line.”Coupe said: “It remains a challenging market. We are expecting deflation to continue through the summer and clearly that has a significant impact on our sales line.”
Coupe said overall prices in the grocery market had fallen by 4% over the past two years and falls in commodity prices and strong competition meant deflation could continue throughout this year.Coupe said overall prices in the grocery market had fallen by 4% over the past two years and falls in commodity prices and strong competition meant deflation could continue throughout this year.
He said shoppers had more money in their pockets to spend but were tending to spend it outside traditional retail - on holidays and new cars.He said shoppers had more money in their pockets to spend but were tending to spend it outside traditional retail - on holidays and new cars.
Despite that shift, Sainsbury’s is planning to open five new supermarkets and up to 50 convenience stores this year, compared with a net four supermarkets and 66 convenience stores last year. But it will refurbish 25 supermarkets after just seven refurbishments last year where it trialled new ideas such as expanded takeaway areas.Despite that shift, Sainsbury’s is planning to open five new supermarkets and up to 50 convenience stores this year, compared with a net four supermarkets and 66 convenience stores last year. But it will refurbish 25 supermarkets after just seven refurbishments last year where it trialled new ideas such as expanded takeaway areas.