Sainsbury's warns over 'challenging' trading as profits dip to £503m

Nettie James
May 4, 2017

The supermarket said that Argos had boosted sales, but many analysts were anxious that it has lost sight of its core mission - selling food.

Coupe also reported that total transactions across the group had increased by almost 3% to 26 million a week during the 12-month period.

Like-for-like sales were down 0.6% but this was an improvement on the 0.9% decline in the previous year.

Sainsbury's has reported an 8.2% fall in annual profits to £503 million for and cautioned over competitive trading and "uncertain" price pressures from the Brexit-hit pound.

Chief executive Mike Coupe said the past year had been "one of the most interesting and challenging and volatile years in my working lifetime". "However, we are well placed to navigate the external environment and we remain focused on delivering our strategy", Coupe concluded.

"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".

While the director of the retail consultancy Retail Vision, John Ibbotson noted, "Argos has so far proved an effective "get out of jail" card for Sainsbury's".

Underlying pretax profit fell 1 percent to 581 million pounds ($750 million) in the 12 months ended March 11, the London-based company said in a statement Wednesday.

Nonetheless, Coupe added Sainsbury's continues to find ways to simplify its business and reduce costs, and is on track to deliver its three-year GBP500m cost saving programme by the end of 2017/18, plus a further GBP500m of cost savings over three years from 2018/19. It also reduced net debt by £349m to £1.5bn.

Some analysts also say Argos increases Sainsbury's exposure to the threat of Amazon [AMZN.O] and to higher import costs at a time when pressure on discretionary purchases is building as inflation grows and wage growth is muted. Should this worry stakeholders though? "Sainsbury's Group offers customers market-leading product choice, value and convenience, whenever and wherever they shop with us". "In the last five years we've done incredibly well, broadly speaking, to maintain market share". "Sushi and patisserie does not fill a family's fridge".

Other reports by Insurance News

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