Supermarket giant Sainsbury’s, which yesterday revealed it is in merger talks with Asda, is set to report a fresh fall in profits this week.
Sainbury’s is set to report a 6 per cent dip in annual pre-tax profits to £472 million on Wednesday, according to UBS analysts.
Excluding one-offs, City consensus forecasts are for Sainsbury’s to unveil a 1.5 per cent fall in profits to £572m – the fourth successive year of falling earnings.
UBS believes sales at household goods subsidiary Argos were dragged down in the final three months of Sainsbury’s financial year as it was impacted by stock clearances at collapsed electronics rivals Maplin and Toys R Us.
“There have been some high profile general merchandise capacity exits through the first quarter of this year, which we expect to have had some impact on Argos sales as stock is liquidated, although this plays to Argos ultimately benefiting as an industry consolidator,” the investment bank said in a note.
In 2016 Sainsbury’s paid £1.4 billion to take over Argos and Habitat owner Home Retail Group and has been expanding its ranges and presence since. There are now 213 Argos stores within supermarkets. Barclays forecasts flat Q4 like-for-like sales across Sainsbury’s as consumers still face an earnings squeeze and inflation.
If the merger goes ahead between Sainbury’s and Asda –Britain’s second and third largest supermarket chains – the combined group would comprise 2,800 stores and would represent about 30 per cent of the UK grocery market, similar to Tesco’s share. Any merger would likely require the Competition and Markets Authority.