Sainsbury’s has reported a £72m loss in the year to March – its first full-year loss for 10 years.
The results were hit by several one-off costs, including a write down on the value of some of its stores.
Excluding the one-off costs, underlying pre-tax profits fell 15% to £681m in the 52 weeks to 14 March, compared with £798m the year before. Like-for-like sales, excluding fuel, fell 1.9%.
Mike Coupe, chief executive, 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.”
Himanshu Pal, director of retail insights, Kantar Retail, suggested the battle in the UK grocery market is getting the better of Sainsbury’s.
“As the price war rages, Sainsbury’s £200m investment in price reductions and simplified promotional activity may lose out to the likes of Asda and Morrisons who are committing double this amount,” he said.
“Mike Coupe has been making the right moves but time is not on his side, with shareholders baying for a short-to-medium term return on investment. But serving short-term profitability – such as saving £500m in three years through job cuts – might be counter-productive in the long run.”
According to Pal, Sainsbury’s continues to struggle with the structural issues that confront all traditional big box players but it has made some positive moves to combat these problems.
“It has started some good initiatives such as subletting excess in-store space to non-food retailers, rationalising in-store assortment, increased focus on general merchandise and clothing, and repurposing its real-estate to develop residential apartments with Sainsbury’s as the anchor occupant,” he said.
On a positive note, Pal said Sainsbury’s performance in terms of convenience and online expansion are notable and Kantar Retail expects to see continued investments in these channels.
David Gray, retail analyst at Planet Retail, agreed: “Sainsbury’s does have some structural advantages over rivals. There is its convenience portfolio, which is large and growing fast. Also, it has more limited exposure to big-box, meaning its property writedown will be a fraction of rival Tesco’s nearly £4bn. All the same, a tough year lies ahead for one of the UK’s largest grocers,” he said.