Sainsbury’s reports a slump in pre-tax profits despite price cuts

(qlmbusinessnews.com via news.sky.com– Thur, 7th Nov 2019) London, Uk – –

The company says it is making progress in boosting its fortunes in the wake of its failed bid to merge with Asda.

Sainsbury's has reported a slump in pre-tax profits, with sales falling despite price cuts and new value ranges.

The supermarket chain, which also owns Argos, said it had achieved “positive momentum in grocery market share” in highly competitive times.

But it reported a 0.2% decline in group sales to £16.8bn over the 28 weeks to 21 September – its first half – with like-for-like sales, a comparable measure, falling 1%.

Trading pre-tax profits fell 15% to £238m. Sainsbury's blamed the phasing out of cost savings and tough weather comparisons.

On a statutory basis, pre-tax profits which include one-off costs came in at £9m. The figure covering the same period last year was £107m.

The company said this was mainly explained by a previously-flagged £203m writedown in the value of its estate that was mainly non-cash and reflected store closures.

Sainsbury's said its grocery and clothing offerings had a better performance in the second quarter than in the first.

Its chief executive, Mike Coupe, is under pressure to grow revenue after being accused of taking his eye off the ball as he fought for a £12bn merger with Asda.

The deal was blocked on competition grounds in April.

Mr Coupe said of the first half performance: “We have created positive momentum across the business through strategic investments in our customer offer.

“We have lowered prices on every day food and groceries, launched a range of value brands and are more competitive on price than we have ever been.

“We are investing in hundreds of Sainsbury's and Argos stores, introducing new products and services and continually improving service and availability. As a result, customer satisfaction has increased significantly year on year.”

The company guided that the retail sector remains “highly competitive” – a consequence of the price war that has been raging for years as discounters Aldi and Lidl capture market share from the ‘big four' chains.

Sainsbury's raised its interim dividend by 6% and shares, down 22% in the year to date, opened 1% higher.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said of the results: “The supermarket landscape has become more competitive and Sainsbury is fighting to keep sales moving in the right direction.

“We've had good news from M&S' food business this week, and its deal with Ocado will just add more pressure into the mix.

“It begs the question: what can Sainsbury's do to differentiate itself? 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.”

By James Sillars