Sainsbury's full-year profits fall 8.2%

Thursday, 04 May, 2017

Sainsbury's, which trails market leader Tesco (TSCO.L) in annual sales, cautioned that it saw no let-up in the intensely competitive United Kingdom market any time soon.

Sainsbury's, which bought Argos for £1.4 billion last year, said underlying pre-tax profit fell 1% to £581 million in the year to March 11.

Chief executive Mike Coupe said the United Kingdom grocery sector was "one of the most challenging, if not the most challenging, in the world".

ETX Capital's Neil Wilson said Sainsbury's full years were "not a great set of numbers", and that the most concerning aspect of the supermarket's performance was its 0.6 per cent drop in like-for-like sales.

Despite these challenges, Coupe said: "Our food business remains resilient in a challenging market and we continue to innovate in quality and to invest in price".

"This has been a pivotal year and we have made significant progress delivering and accelerating our strategy", said Sainsbury's CEO Mike Coupe.

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Group sales rose to £29.1bn from £25.8m, mainly as a result of the Argos contribution, but Sainsbury's like-for-like sales declined by 0.6 per cent.

It also said it was on track to deliver its three-year 500 million pounds cost saving programme by the end of 2017-18, with a further 500 million pounds of savings targeted over three years from 2018-19.

Coupe insisted that the company had a three- to five-year plan to move towards "strong and steady" profits growth. We have opened 59 Argos digital stores in Sainsbury's supermarkets and they are performing well.

Sainsbury's said the lower overall profit figure reflected investment in its customer offer and cost inflation. Should this worry stakeholders though? The group's shares have lost more than four percent of their value over the past year, but have recovered some nine percent in the year-to-date.

Chris Beauchamp, chief market analyst at IG, pointed out that Sainsbury's shares "touched a 52-week high yesterday, so the weakness today makes sense when viewed in the light of profit-taking and worries about a tougher environment in the months ahead".