5th Nov 2020 09:32
(Alliance News) - J Sainsbury PLC on Thursday guided for a rise in annual profit despite swinging to an interim loss on one-off costs and lower sales, but announced that it would cut 3,500 jobs as part of a cost-reduction plan.
For the six months ended September 19, the FTSE 100 supermarket chain reported a pretax loss of GBP137 million, compared to a profit of GBP9 million the year before. J Sainsbury was hit by GBP438 million in one-off costs, which includes GBP259 million from restructuring programmes, and GBP214 million in impairments, partly offset by a reimbursement of GBP42 million from ATM business rates.
On an underlying basis, profit rose by 26% to GBP301 million from GBP238 million. Group sales, excluding VAT but including fuel, declined by 1.1% to GBP14.93 billion from GBP15.10 billion in the prior year, as a result of fuel sales falling by 45%. Like-for-like sales excluding fuel were up 6.9% however.
Total retail sales increased by 7.1% year-on-year but were down by 1.4% when including fuel.
Grocery sales were up 8.2% year-on-year at GBP11.2 billion, while General Merchandise sales from the Argos unit increased by 7.4% to GBP3.2 billion. However, Clothing sales fell by 18%, heavily affected by the lockdown period.
J Sainsbury declared an interim dividend of 3.2 pence per share, down 3% from 3.3p a year before. In addition, the group declared a special payout of 7.3p, in lieu of a final dividend for the financial year that ended March 7.
Looking ahead, J Sainsbury expects its annual underlying pretax profit to be 5% higher from the GBP586 million reported the year before, as Grocery and General Merchandise sales remain strong in the second half to date, while Financial Services is expected to make a return to profit.
However, the group noted that it could not fully predict the effect of Covid-19 and the new lockdown restrictions on its performance in the second half of the year.
Looking further ahead, the company said it will close around 420 Argos standalone stores, reducing the standalone estate to just 100 by March 2024. However, it will open 150 more Argos stores in Sainsbury's supermarkets by that target date, as well as 150 to 200 more Argos collection points in supermarkets and convenience stores.
J Sainsbury confirmed that as part of its cost-cutting plans, "around 3,500" jobs could be lost. This is higher than the 3,000 job cuts reported by UK media outlets ahead of Thursday's results announcement.
"As we go into lockdown in England for the second time this year and restrictions are in place across the UK, we know our customers and colleagues are feeling anxious and we will do all we can to support them," said Chief Executive Simon Roberts.
Shares in J Sainsbury were down 2.8% at 203.00 pence on Thursday morning in London.
By Dayo Laniyan; [email protected]
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