Sainsbury’s profit down in ‘challenging’ market

Business & Economy 03 May 2017
Sainsbury’s profit down in ‘challenging’ market

Sainsbury's profits slide 8.2% amid 'challenging' market

The business saw sales growth in convenience stores and online but faced a decline in its supermarkets, plus higher costs.

Image: Sainsbury's shares were down two percent after the results

By John-Paul Ford Rojas, Business Reporter

Sainsbury's has reported lower annual profits and warned of a "challenging" grocery market, though it received a boost to earnings from its takeover of Argos.

Pre-tax profits for the 52 weeks to 11 March were down 8.2% to £503m and Sainsbury's warned there was no sign of a let-up in the intense competition it faces.

Chief executive Mike Coupe said it was a "pivotal year" for the group after the £1.4bn takeover of Argos, which contributed £77m to profits.

Sainsbury's said the lower overall profit figure reflected investment in its customer offer and cost inflation.

Mr Coupe said: "Our food business remains resilient in a challenging market and we continue to innovate in quality and to invest in price."

Sainsbury's like-for-like store sales fell 1% in its first-half
Video: Customers facing price rise challenge

Sainsbury's said it faced a further squeeze on profits in the first half of the current financial year due to rising wages for store workers.

"The market remains competitive and the impact of cost price pressures remains uncertain," the group said.

Shares fell 2%.

Like-for-like sales were down 0.6% but this was an improvement on the 0.9% decline in the previous year.

Sainsbury's faces tough competition from supermarket rivals in a sector that has come under pressure from discounters Aldi and Lidl.

At the same time, costs are being pushed higher because the pound's sharp fall since the Brexit vote has driven up the price of imported goods.

Argos' parent company Home Retail Group was acquired by Sainsbury's in September 2016
Image: Sainsbury's bought Argos last year

Mr Coupe said Sainsbury's was pleased with progress since snapping up Argos, having opened 59 Argos Digital stores in its supermarkets, and is now accelerating plans to open a total of 250.

Units currently housed within Homebase stores are being closed.

Sainsbury's results showed that while convenience store sales were up 6% and online groceries by 8%, the group's supermarkets saw a decline of 2%.

General merchandise and clothing saw an uplift, highlighting the fact it was food sales that are under pressure.

Argos sales climbed 4.1%.

More recent industry data from Kantar Worldpanel, released shortly after the annual results, painted a brighter picture for the business.

It pointed to the best sales growth for Sainsbury's since 2014 in the 12 weeks to 23 April, amid a revival for all the major supermarkets as price rises accelerated after two years of deflation.

However, much of the strong performance was attributed to the timing of Easter this year.

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