6th May 2015 08:44
LONDON (Alliance News) - J Sainsbury PLC on Wednesday reported a pretax loss for its recently ended financial year, while its underlying profit before tax and revenue also fell, as it invested in price cuts to compete against its rivals in a deflationary food market.
The supermarket chain reported a pretax loss of GBP72 million for the year ended March 14, compared with a pretax profit of GBP898 million the year before. Its underlying profit before tax fell 15% to GBP681 million from GBP798 million, while underlying group sales fell 0.9% to GBP26.1 billion from GBP26.4 billion.
The pretax loss resulted from a GBP753 million charge to items excluded from the underlying results, including a non-cash property impairment and onerous contract charge of GBP628 million, costs of GBP53 million in relation to transitioning Sainsbury's Bank to a new banking platform, GBP17 million pension compensation payments made to employees as a result of the closure of Sainsbury's defined-benefit pension scheme, and internal restructuring costs of GBP15 million. Sainsbury's said.
The property impairment occurred in the first half of the year during a reassessment of the supermarket's store pipeline and decision to withdraw from development of some planned sites. Chief Financial Officer John Rogers told journalists that he doesn't foresee "the need for any more property impairments" in the near future.
In November, Chief Executive Mike Coupe revealed his strategy to invest GBP150 million a year in price cuts for the next three years, resulting in price reductions in over 1,100 products.
Sainsbury's said it has seen a 6% improvement in sales volume following the price cuts, which it believes will put it ahead of its competitors amidst a price war in a deflationary food market.
?We will match our competitors toe-to-toe, our prices have never been better,? Coupe told journalists on Wednesday, adding that he believes the supermarket has the financial capacity and flexibility to maintain that position and to respond if "price moves go further".
However, sales growth in the industry is still expected to decline in an "extremely challenging" market, according to Rogers.
?The underlying pressures of the industry will remain from a deflation point of view and therefore we would expect that the underlying sales growth of the industry will be negative for the foreseeable future,? Rogers told journalists.
Sainsbury's will pay a full-year dividend of 13.2 pence per share, down 24% from the 17.3p paid last year.
"The UK marketplace is changing faster than at any time in the past 30 years which has impacted our profits, like-for-like sales and market share. However, we are making good progress with our strategy, and our investment in price and quality is showing encouraging early signs of volume and transaction growth," Coupe said in a statement.
The latest Kantar Worldpanel UK grocery market data, also released Wednesday, showed the UK grocery market growing 0.2% in the 12 weeks to April 26, but with Sainsbury's sales down 0.2% year-on-year and its market share shrinking slightly to 16.5% from 16.6% a year earlier.
Shares in Sainsbury's were trading down 3.4% at 265.60 pence Wednesday morning.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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