Property write-down pushes Sainsbury’s into the red

Sainsbury's has announced its first annual profits fall in a decade.

Sainsbury's has announced its first annual profits fall in a decade. - Credit: PA

Sainsbury’s today announced its first drop in profits in a decade as it counts the cost of “unprecedented” change in the supermarket industry.

The UK’s third biggest grocer posted an underlying profit of £681million for the year to March 14, a 14.7% decline on a year earlier after a period in which like-for-like sales dropped 1.9%.

And the chain recorded a bottom-line loss of £72m when including an accounting write-down to cover the lower value of its property estate.

The company cut its full-year dividend for shareholders by 23.7%.

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.

“However, we are making good progress with our strategy, and our investment in price and quality is showing encouraging early signs of volume and transaction growth.”

The value of the company’s property decreased during the year by £900m to £11.1billion, mainly due to a reduction in market rental values. The group has 597 supermarkets and 707 convenience shops.

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In the current financial period, Sainsbury’s expects another year of falling like-for-like sales, driven by challenging market conditions and food price deflation.

It expects to deliver around 450,000 sq ft of gross new space, with one to two new convenience store openings per week. This compares with the addition of 733,000 sq ft of selling space in the previous year, when it opened eight new supermarkets and 98 convenience stores.

The full-year results are the first under Mr Coupe since he succeeded Justin King, who stepped down last year following a successful decade in charge of the supermarket.

Britain’s big four grocers - including Tesco, Morrisons and US-owned Asda - are engaged in fierce competition as they scramble for market share, which is being eaten away by discounters Aldi and Lidl.

In November, Mr Coupe unveiled a wide-ranging plan to fight back against the discounters, including a £150 million investment in price cuts over the next year and an improvement in the quality of 3,000 own-brand products.

He pointed out that a quarter of its stores have under-used space and over the next five years this will be used to expand its non-food goods and also be given over for in-store concession partnerships.