Sainsbury’s profits to shrink for the first time in a decade

An employee works on a checkout at a Sainsbury's supermarket in Brentwood, Essex, UK

J Sainsbury will this week unveil its first fall in annual profits for a decade as the shift in consumer habits and competition from discounters take a massive toll on Britain’s third largest supermarket. 

Sainsbury’s is expected to report a 17pc fall in underlying pre-tax profits, which excludes one-off items and property writedowns, to £659m. This will be the first time that Sainsbury’s has suffered a profits fall since 2005, when then-chief executive Justin King committed hundreds of millions of pounds to turn around the ailing chain. 

The slide, for the year to March 2015, is also the consequence of Sainsbury’s losing sales and committing funds to fighting the turmoil in the industry. Shoppers are turning away from supermarkets and moving towards the discounters Aldi and Lidl, convenience stores, and online. 

In November, chief executive Mike Coupe said the company would cut prices by £150m – which has lowered profit margins. He warned that like-for-like sales in supermarkets will fall for the “next few years”. 

Morrisons, Britain’s fourth largest grocer, is also likely to report a fall in sales in a trading update on Thursday. Analysts at Barclays have forecast a 3.3pc fall in like-for-like sales. 

David McCarthy, analyst at HSBC, said Sainsbury’s operating margin had fallen from 3.7pc to 2.8pc over the past year and could fall even further.

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Posted on May 5, 2015, in #retail, #uk. Bookmark the permalink. Leave a comment.

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