4th Jul 2016 09:46
LONDON (Alliance News) - Blue-chip grocer J Sainsbury PLC said on Monday it will end its joint venture of trial Netto UK stores with Dansk Supermarked Group following a comprehensive review, and said instead it will be focusing on its acquisition of Home Retail Group PLC.
The Netto UK joint venture was launched in June 2014 in a bid to capitalise on the growing discount grocery retail segment in the UK, Sainsbury's said, but following the initial period of trial store openings, the pair have decided to end the joint venture after assessing trading data, customer and operational insights, expansion costs, the evolving food retail market and the long-term strategies for each business.
The 16 Netto stores will continue to trade through July and will close in August, Sainsbury's said.
"Since we first envisaged the trial, almost three years ago, the grocery sector has evolved significantly," said Chief Executive Mike Coupe, noting that "against this backdrop, as planned, we carried out a detailed review with Dansk Supermarked on the future of Netto".
"To be successful over the long-term, Netto would need to grow at pace and scale, requiring significant investment and the rapid expansion of the store estate in a challenging property market. Consequently, we have made the difficult decision not to pursue the opportunity further and instead focus on our core business and on the opportunities we will have following our proposed acquisition of Home Retail Group," Coupe added.
The Home Retail acquisition is expected to take place in the third quarter of 2016.
Sainsbury's said it was working with Dansk Supermarked to minimise the impact on Netto colleagues, and said its current carrying value in the Netto joint venture is GBP20.0 million which will be written down to zero. Sainsbury's is expecting cash costs of around GBP10.0 million to wind down the business, it said.
Shares in Sainsbury's were down 0.5% at 234.84 pence on Monday morning.
By Hannah Boland; [email protected]; @Hannaheboland
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