Sainsbury's pre-tax profits fall on price pressures

Tammy Harvey
May 4, 2017

Coupe said in the statement: "Our food business remains resilient in a challenging market and we continue to innovate in quality and to invest in price". Retail sales including Value-Added Tax but excluding fuel were also up 14.1%.

Sainsbury's was the biggest blue chip faller, sinking nearly 6 percent after the grocer reported a third straight year of underlying profit decline, despite the boost to earnings from last year's purchase of Argos, the general merchandise retailer.

However, the company's overall sales jumped by 12.7 per cent, buoyed by Argos' contribution during the final six months, which Sainsbury's bought when it acquired Home Retail Group for £1.4 billion previous year.

'Unlike its domestic rivals Tesco (TSCO) and Morrisons (MRW), like-for-like sales at Sainsbury's have remained stubbornly negative recently, ' said George Salmon, equity analyst at Hargreaves Lansdown.

Analyst Neil Wilson of ETX Capital noted that "Sainsbury's sales are declining and it is losing market share".

Like-for-like sales at its stores open for more than a year fell by 0.6 per cent in the 52 weeks to 11 March 2017, owing largely to food price deflation. Supermarket boss Mike Coupe chirruped the phrase numerous times on Wednesday in order to bat away pesky questions about another food sales slip. This leaves supermarkets with big supermarkets that are increasingly struggling to pay their own way.

"We are therefore accelerating our plan to open a total of 250 Argos Digital stores in Sainsbury's supermarkets and will deliver our £160m EBITDA synergy target by March 2019, six months ahead of schedule. We are also investing in growth areas of the business to meet the changing ways that customers shop".

In addition, the company reported 8% growth in groceries online and more than 6% growth in convenience.

Sainsbury's, which trails market leader Tesco (TSCO.L) in annual sales, cautioned that it saw no let-up in the intensely competitive United Kingdom market any time soon.

Meanwhile, with 8m customers buying its Tu clothing, the company's market share by volume increased by 20 basis points making it the sixth largest clothing retailer by volume in the United Kingdom, with a strong position in the womenswear and childrenswear markets and opportunities for future growth in menswear.

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