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Slump for supermarket chain

Sainsbury’s profits fall amid heavy discounting

Sainsbury's Local

Heavy discounting hit Sainsbury’s which reported an 8.2% fall in full-year profits to £503 million. Group sales in stores open for more than a year fell 1%.

Chief executive Mike Coupe said: “The market remains competitive and the impact of cost price pressures remains uncertain.”

The full-year dividend paid to shareholders has also been reduced by 15.7% to 10.2p a share.

These are the first results to include figures from the Argos and Habitat brands, which were bought for £1.4 billion last year. Adding in their sales saw group sales increase by 12.7%.

Mr Coupe said: “We have opened 59 Argos Digital stores in Sainsbury’s supermarkets and they are performing well. We are therefore accelerating our plan to open a total of 250 Argos Digital stores in Sainsbury’s supermarkets.”

John Ibbotson, director of the retail consultancy Retail Vision, said: “What began as a bolt-on has turned into a lifeboat. For the embattled Sainsbury’s, the Argos acquisition is looking more inspired by the day.

“Incorporating the catalogue brand initially swallowed time and resources – but it has begun paying dividends that flatter these otherwise insipid results and could prove crucial in future.

“Argos is undoubtedly the trump card responsible for the solid increase in group sales.

“But while Mike Coupe will be keen to dismiss the fall in underlying profits as a blip brought on by the cost of the acquisition, this should not distract from the weaknesses in the core Sainsbury’s grocery business.

“The convenience and online offerings are a bright spot in an otherwise challenging picture. Food price inflation has slashed margins and Sainsbury’s continues to lose market share to both Tesco and Morrisons.

“The brand’s much-vaunted turnaround plan has been slower to show results than those of its rivals, who have successfully staunched their losses with aggressive price cuts and structural reforms.

“Argos has so far proved an effective ‘get out of jail’ card for Sainsbury’s. But with inflation biting into consumer spending and the latest retail sales figures showing that the consumption boom is waning, Sainsbury’s must get its core business in order before it comes off its catalogue crutches.”

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