7th Nov 2019 08:47
(Alliance News) - J Sainsbury PLC on Thursday reported a revenue fall with profit sinking by 92% due to a series of redundancy costs and store closure expenses.
In the period to September 22, revenue fell by 0.2% to GBP15.10 billion from GBP15.13 billion. The grocery giant's pretax profit fall sharply to GBP9 million from GBP107 million in the first half of last year.
The profit decline was primarily due to GBP229 million in non-underlying costs, up 33% from GBP172 million last year. These were related to stores closures, restructuring costs such as redundancy payouts, and impairment expenses.
The company raised its interim dividend by 6.5% to 3.3 pence per share from 3.1p.
Underlying group sales, including VAT, fell by 0.2% on last year to GBP16.86 billion from GBP16.88 billion. Excluding fuel, like-for-like sales were down 1.0% in the period. Total retail sales were down 0.6% and down by 0.3% when including fuel sales.
Grocery sales were broadly flat year-on-year at GBP10.34 billion, with general merchandise sales from its Argos unit, down 2.5% to GBP3.03 billion from GBP3.11 billion. Clothing sales fell by 1.2% to GBP494 million from GBP488 million.
In its financial services segment, revenue rose by 6.3% to GBP289 million from GBP272 million.
In September, the firm said it will "immediately stop new mortgage sales" in the division and have no more "capital injections" after a GBP35 million investment in the year ending February 2020.
It also said it aims to cut the cost to income ratio by around 50%. The measures are part of a "five year plan" for the financial services unit with the aim of doubling underlying pretax profit and deliver double-digit returns on capital employed.
The company also eyes further cost-cutting measures, by further integrating the Sainsbury's supermarket unit and the Argos merchandise chain, a programme which has already made progress.
The firm explained: "We aim to deliver cost savings to cover the impact of cost inflation. We also have the opportunity to structurally reduce our costs by roughly GBP500 million over five years by bringing Sainsbury's and Argos together.
"Sainsbury's and Argos teams are now working together across key functions including marketing, commercial operations, digital and technology and offer an integrated service to customers across our brands and channels, helping us simplify the business."
Chief Executive Mike Coupe said: "We have set out our plan to create one multi brand, multi-channel business. This will make the combined Sainsbury's and Argos offer much more accessible for customers and gives us the opportunity to make our business more efficient."
Looking ahead, the company said the retail market will remain "highly competitive" though it expects profits to improve in the second half.
Sainsbury's explained: "We expect profit in the second half to benefit from the annualisation of last year's colleague wage increase and a normalisation of marketing costs and weather comparatives."
In September, the company said an internal review resulted in plans to launch 10 new supermarkets but close between 10 to 15.
Roughly 100 new convenience stores will be built, the firm explained at the time, but between 30 and 40 will be closed. It also plans to open roughly 80 new Argos stores but close between 60 and 70.
Sainsbury's shares were 1.3% higher at 208.20 pence each in London on Thursday morning.
By Eric Cunha; [email protected]
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