Sainsbury’s faces £46m in costs after failed Asda bid

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Sainsbury's
// Sainsbury’s faces costs of £46m after failed attempt to merge with Asda
// CMA blocked the proposed £12bn deal on April 25
// Sainsbury’s annual pre-tax profits plummet 46.1% to £239m, or up 7.8% to £635m on underlying basis
// Like-for-likes down 0.9% in final 3 months

Sainsbury’s is facing the costs of up to £46 million over its failed merger attempt with Asda as it reports a rise in full-year underlying pre-tax profits.

For the full-year period ending March 9, the Big 4 retailer reported a 46.1 per cent plunge in pre-tax profits to £239 million as the failed Asda merger bit, but on an underlying basis pre-tax profit was up 7.8 per cent to £635 million.

This came despite a 0.9 per cent fall in like-for-like sales in the final three months of the year.

Sainsbury’s said the growth in like-for-like sales continued to slow down in the fourth quarter when sales fell 0.9 per cent, having fallen 1.1 per cent over the Christmas trading period.

The grocery giant also said it was facing a £46 million hit from its failed bid to merge with Asda, which was first announced in April 2018.

After a drawn-out probe into the £12 billion deal, a final verdict from the CMA on April 25 saw it rejected altogether amid concerns the new business entity would have caused an increase in prices as well as longer check-out queues.

Meanwhile, Sainsbury’s has attributed its profits rise to overall food performance, while experiencing growth from all its channels.

It said convenience and online sales grew 3.7 per cent and 6.9 per cent respectively, with its convenience arm outperforming the market.

Supermarket sales grew by one per cent, as Sainsbury’s capitalises from the addition of Argos stores within its stores.

Retail underlying operating profit is reported to have increased 10.7 per cent to £692 million.

Sainsbury’s said it was investing to improve over 400 of its stores this year and indicated that its new target was to reduce net debt by at least £600 million over the next three years.

Underlying earnings per share increased by 7.8 per cent to 22.0 pence per share.

“I am pleased to report that we have increased profits, reduced net debt and increased the dividend,” Sainsbury’s chief executive Mike Coupe said.

“This is testament to the hard work of colleagues across the business and I would like to thank them for their commitment during this year of change.

“We completed the integration of Argos that we set out in 2016, delivering £160 million in synergies ahead of schedule.

“We completed a major transformation of how we run Sainsbury’s stores and have made significant improvements to store standards in recent months, which remain a focus.”

He added: “We will increase and accelerate investment in the core business, investing to improve over 400 supermarkets this year.

“£4.7 billion of our revenue now comes from our online businesses and we are increasing investment in technology to make shopping across Sainsbury’s, Argos and Sainsbury’s Bank as quick and convenient as possible.

“We will also continue to strengthen our balance sheet and are making a new commitment to reduce net debt by at least £600 million over the next three years.

“I am confident in our strategy and also clear on what we need to do to continue to evolve the business in a highly competitive market where shopping habits continue to change.”

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