Sainsbury’s profits fall 92 per cent after failed Asda bid and property reshuffle

Pre-tax profits slide to £9 million in the first half of 2019

Sainsburys profits fall 92 per cent after failed Asda bid and property reshuffle                                 

J Sainsbury, Britain’s third-largest supermarket chain, reported a 92 per cent drop in profits in the second half of this year, predominantly as a result of the collapse of its proposed merger with rival Asda, but also due to a raft of store closures as it attempts to restructure its business.

The 150-year old company reported statutory pre-tax profit of £9 million in the six months to September 28, down from £107 million in the same period last year. Group sales fell 0.2 per cent to £16.9 billion, while like-for-like sales fell 1 per cent.

The bulk of the hit to Sainsbury’s profits came from the collapse of its attempted merger with rival chain Asda, which British regulators blocked earlier this year, as well as charges relating to its real estate portfolio and bad weather compared to the previous year, which eroded consumer demand.

“Today’s numbers appear to reflect the cost of the collapse of the deal as well as a charge of £229 million which represents a re-evaluation of its property portfolio and restructuring costs,” CMC Markets chief strategist Michael Hewson said.

Sainsbury’s announced in September it would close up to 70 Argos branches, which it acquired as part of its purchase of the general merchandise retailer in 2016. It plans to move them inside its stores as part of a wider reorganisation that will also see the closure of up to 15 supermarkets and 40 convenience stores.

However, chief executive Mike Coupe sounded optimistic, saying that while the retail market remained highly competitive and the consumer outlook uncertain, the company expected profits in the second half of the year to benefit from the annualisation of last year’s wage increase and a normalisation of marketing costs and weather comparatives.

“We have set out our plan to create one multi brand, multi-channel business. This will make the combined Sainsbury’s and Argos offer much more accessible for customers and gives us the opportunity to make our business more efficient,” he said in a statement.

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