By Saabira Chaudhuri
J Sainsbury PLC on Wednesday reported its first drop in
full-year underlying profit in a decade as the company reeled from
the impact of a fierce price war that has put immense pressure on
all of Britain's large grocers.
Group sales, excluding value added tax, edged down 0.7% in the
52 weeks ended March 14 to GBP23.78 billion ($36.12 billion).
Underlying pretax profit, which strips out one-time items and
pension expenses, dropped 15% to GBP681 million.
Sainsbury reported a full-year pretax loss of GBP72 million,
including one-time charges, compared with a profit of GBP898
million a year earlier.
"The U.K. marketplace is changing faster than at any time in the
past 30 years which has impacted our profits, like-for-like sales
and market share," said Chief Executive Mike Coupe. The results
mark the first year that Mr. Coupe has run Sainsbury after longtime
CEO Justin King stepped down.
The results come as analysts have predicted Sainsbury will
suffer as rival Tesco PLC's performance begins to improve. HSBC
analyst David McCarthy has said he is "unconvinced that Sainsbury
has the strategy to overcome its relative scale disadvantage versus
Tesco, deteriorating industry conditions and a challenged balance
sheet."
The U.K.'s "big four" chains--Tesco, Wal-Mart Stores Inc.-owned
Asda, Sainsbury and Wm Morrison Supermarkets PLC--have been losing
customers to discount chains such as Aldi and Lidl, which are
rapidly expanding and benefiting from an improving customer
perception of quality. In a bid to win back market share, Sainsbury
and its rivals have been slashing prices and cutting management
jobs as they put more staff on the shop floor.
Sainsbury in November outlined a plan to save GBP500 million
over the next three years and has said it would cut hundreds of
jobs as part of the process. The grocer has also said it would pour
GBP150 million into cutting prices.
The company on Wednesday proposed a full-year dividend of 13.2
pence, down 24%.
Sainsbury's banking unit marked a relative bright spot, with
operating profit up 17% to GBP62 million. However, the company said
its total capital costs associated with its transition into full
ownership of the bank are expected to increase by between GBP80
million and GBP120 million.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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