Sunday 23 October 2016

Sainsbury's cautious on outlook as profits fall again

Published 04/05/2016 | 08:44

Shares in Sainsbury's were down 3.6pc at 271.6 pence each heading into the close last night.
Shares in Sainsbury's were down 3.6pc at 271.6 pence each heading into the close last night.

Supermarket chain Sainsbury's said it did not expect tough trading conditions to lift any time soon as it reported a second straight year of profit decline, dragged down by its own price cuts.

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Sainsbury's, which has coped better than most with the recent turmoil in the sector, did beat analysts' profit forecasts for the 2015-16 year and said its strategy was working well. But it still issued a cautious outlook for the industry.

"The market is competitive, and it will remain so for the foreseeable future," said Chief Executive Mike Coupe on Wednesday. "We believe we have the right strategy in place."

Sainsbury's, which has shown greater resilience to competition from German discounters Aldi and Lidl than its traditional rivals - market leader Tesco, Asda and Morrisons, made an underlying pretax profit of 587 million pounds in the year to March 12.

That compares to analysts' average forecast of 574 million pounds and 681 million pounds made in the 2014-15 year.

The firm, which last month agreed a 1.4 billion pounds takeover of Argos-owner Home Retail, said group sales fell 1.1pc to 25.8 billion pounds.

"We continue to outperform our main supermarket peers and maintain market share in a competitive, deflationary environment," said Coupe.

In March Sainsbury's reported fourth quarter like-for-like sales growth, excluding fuel, of 0.1pc -- its first quarter of growth in over two years.

Its supermarkets recorded both like-for-like transaction and volume growth as customers responded to lower regular prices, better product quality and availability and improved customer service.

Shares in Sainsbury's, up 10.4pc so far this year, closed Tuesday at 285.7 pence, valuing the business at 5.6 billion pounds.

It said it was on track to deliver its three-year 500 million pounds cost saving programme by the end of 2017-18.

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