Sainsburys sees 8 per cent drop in full year profits

Sainsburys sees 8 per cent drop in full year profits

Sainsbury’s full-year profits have fallen 8.2 per cent, from £548m to £503, as the company suffer due to competition and price cuts.

Sales fell by 1 per cent across all stores open for at least a year.

The supermarket chain’s chief executive Mike Coupe said: “The market remains competitive and the impact of cost price pressures remains uncertain.”
These results are the first to include Habitat and Argos, which were bought by the retailer for £1.4bn in 2016.
The addition of these subsidiaries paint a much rosier picture, as with their sales added the group saw a rise of 12.7 percent.
The merging of these operations led to a profit contribution of £77m from Argos and cost savings of £130m.

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.”
“We continue to find ways to simplify our business and reduce costs. We are on track to deliver our three-year £500m cost saving programme by the end of 2017-18 and we will deliver a further £500m of cost savings over three years from 2018-19.”

Sainsbury’s shares saw the biggest drop of any on the London FTSE 100 index, seeing a fall of over 2 per cent within 20 minutes of trade beginning.
The full-year dividend has been lowered by 15.7 per cent to 10.2p per share.
Rising costs has been one of the main factors behind the fall in profits, with the company struggling while attempting to draw in customers.
The retailer also expects the inflation rate to remain around 2 per to 3 per cent for the foreseeable future.
As a result, it is expected that underlying profits for the coming six months will be lower than in the previous six months.

Sainsbury’s chief financial officer, Kevin O’Byrne, told Bloomberg TV: “If you look at prices in our stores today, they are cheaper than they were two years ago and real wages have been growing.
“People are predicting real wages are going to get squeezed further and we are going to have to work harder to keep customers coming through our doors.”

Sainsbury’s are also being affected by changes in consumers’ shopping habits, as customers are making more frequent trips to smaller stores but spending less on these trips; sales in the company’s smaller convenience stores rose by over 6 per cent, while those in its larger supermarkets fell by around 2 per cent.