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Sainsbury’s posts first loss for 10 years amid intense competition from Aldi and Lidl

6th May 2015

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Sainsbury’s has posted its first year’s loss in a decade as intense competition from discount retailers like Aldi and Lidl continues to impact sales at the main supermarket chains.

The company made a £72m loss in the year to March, over which period it had to write down the value of some of its stores. Sainsbury’s is the UK’s third largest supermarket. It compares to a profit of £898m for the previous year.

Last month, the UK’s largest supermarket chain, Tesco, posted a loss of £6.4bn, which was the biggest loss of any UK retailer on record.

In the results statement,  Sainsbury’s chief executive Mike Coupe said: “The UK 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.”

He told the BBC Radio 4 Today programme that with falling fuel and food prices, customers were using their extra disposable income to eat out more.

The supermarket said it is investing in lowering prices on products and improving the quality of 3,000 own-brand products.

It said that general merchandise and clothing are performing strongly, with sales up over 9%.

Sainsbury’s Bank saw operating profit up 17% to £62 million.

Sainsbury’s has posted its first year’s loss in a decade as intense competition from discount retailers like Aldi and Lidl continues to impact sales at the main supermarket chains.

The company made a £72m loss in the year to March, over which period it had to write down the value of some of its stores. Sainsbury’s is the UK’s third largest supermarket.

Last month, the UK’s largest supermarket chain, Tesco, posted a loss of £6.4bn, which was the biggest loss of any UK retailer on record. http://www.mindfulmoney.co.uk/investment-insight/tesco-posts-worst-loss-of-any-uk-retailer-on-record/

In the results statement,  Sainsbury’s chief executive Mike Coupe said: “The UK 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.”

He told the BBC Radio 4 Today programme that with falling fuel and food prices, customers were using their extra disposable income to eat out more.

The supermarket said it is investing in lowering prices on products and improving the quality of 3,000 own-brand products.

It said that general merchandise and clothing are performing strongly, with sales up over 9%. Sainsbury’s Bank saw operating profit up 17% to £62 million.

The Share Centre rates Sainsbury’s a ‘buy’

Sheridan Admans, investment research manager at The Share Centre, says: “The speed of change in the UK grocery market has resulted in Sainsbury’s reporting its first decline in operating profits for a decade, as price cuts continue to squeeze margins. The retailer’s CEO Mike Coupe also said in this trading update that the group plans to invest £150m in to further price cuts, which is likely to result in like-for-like sales remaining negative.

“Investors should note that a rapidly changing landscape for grocers should be good for shoppers in the long term as the big four do what it takes to remain competitive. We continue to recommend Sainsbury’s as a ‘buy’ for contrarian investors as the company leverages its range of shopping channels, diversifies its products and services and focuses on flexibility and convenience. This is where it has advantages over the likes of Aldi and Lidl.

He adds: “Competition and the impact of discounters in the sector has driven whole sale change in the largest supermarkets’ strategies, however it has also undermined pricing power, as we have seen from Sainsbury’s results today. As a result, Food and Drug retailers reporting by the final quarter of 2014 saw annual revenues rise just 2.7% compared to a year ago, climbing to £114.2bn. However, even this meagre growth represented an improvement on the 0.6% seen 12 months before.

“Profit margins are still under pressure among supermarkets, with annual net profits down by 12.2% over the same period, a drop of £353m. Although not encouraging at first glance, the rate of decline is slowing. In the year before, net profits had fallen by 33.7%.”

 

 

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