Sainsbury’s pressure warning after profits decline

Mike Coupe did not rule out making even more price cuts. Picture: PA

Britain’s third-largest supermarket, which has an 8 per cent share of the Scottish market, saw underlying pre-tax profits slide 14.7 per cent to £681 million in the year to 14 March.

That compared with £798m in the previous year, while annual sales were down 0.9 per cent at £26.1 billion. Like-for-like sales, excluding new floorspace, were 1.9 per cent lower.

The chain recorded a statutory pre-tax loss of £72m when including an accounting writedown to cover the lower value of its stores.

In a widely flagged move, Sainsbury’s cut its final dividend from 12.3p a share to 8.2p, giving a full-year payout of 13.2p – down 23.7 per cent on a year ago.

The whole sector has been hit by food price deflation, rising pressure from German discounters Aldi and Lidl, and the fact that people are shopping more locally more frequently.

Mike Coupe, Sainsbury’s chief executive, said he expected deflation to persist in the grocery market for the rest of 2015 and possibly into 2016. He also did not rule out further price cuts in addition to the £150m the group is already committed to.

Coupe said: “The underlying pressures of the industry will remain from a deflation point of view and therefore you would expect that the underlying sales growth of the industry will be negative for the foreseeable future. We have to plan on the downside and hope on the upside.”

Finance chief John Rogers said that the group would remain competitive on price, adding: “If others move on price in the market, we will follow absolutely. We have the financial capacity and the flexibility to do so.”

Industry data from Kantar Worldpanel yesterday revealed that sales at the UK’s “big four” chains – Tesco, Asda, Sainsbury’s and Morrisons – fell in the three months to 26 April. Only Aldi and Lidl, along with upmarket grocer Waitrose, enjoying a rise in takings.