Sainsbury’s half-year profits nosedive 91% as it begins £500m cost-cutting

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Sainsbury's half-year profits nosedive 91% as it begins £500m cost-cutting
Sainsbury's revealed a £203m hit to its balance sheet from a series of store closures as it begins in £500m cost-cutting drive in earnest.
// Sainsbury’s half-year pre-tax profits fell to just £9m, down from £107m last year
// On an underlying basis pre-tax profits were £238m, a 15% year-on-year decline
// Sales were fairly flat at £15.1bn, but like-for-likes declined 1%

Sainsbury’s has revealed a massive drop in statutory half-year profits as the Big 4 grocer started its £500 million cost-cutting drive in earnest.

The supermarket giant said it took a £203 million hit to its balance sheet from a series of store closures and as a result, statutory pre-tax profits came in at £9 million in the six months to September 21 – a 91 per cent nosedive on the £107 million recorded a year ago.

However, Sainsbury’s insisted its plans were on track, with improvements to pricing and product ranges.

Meanwhile on an underlying basis, which removes the one-off costs with the property writedown, pre-tax profits declined 15 per cent year-on-year to £238 million.


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Both statutory and underlying sales during the half-year period were fairly flat, coming in at £15.1 billion and £16.8 billion respectively, while total retail sales excluding fuel slipped 0.6 per cent year-on-year.

Half-year like-for-like sales were down one per cent, but Sainsbury’s highlighted how the 1.6 per cent fall in first quarter like-for-likes improved in the second – declining just 0.2 per cent.

Grocery sales was down 0.1 per cent in the half – although the second quarter again improved, up 0.6 per cent on a like-for-like basis.

The supermarket improved sales across its businesses, which also includes Argos, throughout the second quarter of the year.

General merchandise sales fell two per cent in the second quarter, compared with a 3.1 per cent fall in the first, allowing for a 2.5 per cent decline for the half-year period.

Finally, clothing grew 3.3 per cent in the second quarter compared with a 4.5 per cent fall the first, leading to a 1.2 per cent decline for the half-year.

Chief executive Mike Coupe welcomed the results, pointing out that his strategy to reduce prices and improve availability was working.

“We are investing in hundreds of Sainsbury’s and Argos stores, introducing new products and services and continually improving service and availability,” he said.

“As a result, customer satisfaction has increased significantly year on year.”

Coupe added that prices have been cut on 1000 best-selling groceries, replacing the supermarket’s “Basics” range with new “Value” brands is progressing well, and 350 Taste The Difference products have been relaunched.

Sainsbury’s has also focused on new beauty halls, with 100 in stores by Christmas, and signed an agreement with healthy fast-food chain Leon to sell its products.

In September, Coupe updated investors on the $500 million cost-cutting drive, which will see 125 stores close – including Argos branches – but will open even more.

Sainsbury’s said net store openings will be between 75 and 125 – although 80 of these will be Argos concessions opened in the grocer’s larger supermarket sites.

Around 60 to 70 Argos standalone branches will close.

Ten large Sainsbury’s stores and 110 smaller ones will open under the plans, with 15 supermarkets and 40 convenience stores to close.

As part of new accountancy rules around how property values can be added to balance sheets, Sainsbury’s took the one-off hit of £203 million over the store closures.

However, this was lower than the £230 million to £270 million hit first predicted.

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4 COMMENTS

  1. And this will continue until a more sensible approach taken The CEO should go – he has brought about this catastrophe. The current policy which is obviously is to cut manpower has resulted in shelves being empty even though the stock has been delivered to store. A few days ago I had the misfortune to be in store when there was a power cut. It took some time for the tills to re-set during which we the customers were discussing the standards of Sainsburys. Sadly there was not a good word for them. Get outside the shops TALK to the customers and listen to their comments. I mostly buy only fruit, veg and meat and if we had a local greengrocer I would not be shopping in Sainsburys at all. I get most store cupboard items from Aldi on a once a month shop. Sad but there we are and I have been a customer of Sainsburys for 48 years!

  2. Store nearest to me is on first floor and the escalator broke down leaving only a tiny lift for shoppers to get down stairs with their shopping .It took weeks to get it repaired that store must have lost hundreds of thousands of pounds as everyone just switched to the nearest Tesco’s .

  3. Our local store has gone to bits since the re-structuring meant the decent staff were left with the option to apply for their own job as department managers. The café has imploded spend much of the time closed because of staff shortages.
    What ever the plan was it must have sounded amazing but the reality is I as a customer see nothing but a store that was once vibrant not full of sad faces waiting for something else to come up before moving on.

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