After one-off costs, underlying pre-tax profits fell by 14.7% to £681M in comparison with £798M in the year before.
Group sales fell by 0.9% to £26.12bn, while like-for-like sales, including VAT but excluding fuel, dropped by 1.9% during the period. The results supply further evidence of the impact of supermarket price war, as the nation‘s third largest supermarket battled its other big four rivals – Tesco, Asda and Morrisons – and hard discounters Aldi and Lidl.
Grocery ‘at the core’
Sainsbury chairman David Tyler said the retailer had had strong foundations with grocery “at the core” of its business. Tyler added: “We are confident that we can grow shareholder value through our increasingly multi-channel offer, and by growing businesses across financial services, convenience, online, clothing and general merchandise.”
The management team will continue to maintain the strength of the balance sheet by making significant cost savings, improving working capital and reducing capital expenditure, Tyler said. Also the retailer‘s programme to improve the quality of its 3,000 own-label products was said to be well under way.
“We remain committed to ensuring we pay an affordable dividend with our policy of fixing it at two times cover for the next three years. With this in mind, we are recommending this year a final dividend of 8.2p per share, bringing our full year dividend to 13.2p per share.”
Opened 98 convenience stores
Results: at a glance
- Loss of £72M
- £620M property assets write down
- Pre-tax profits fell 14.7% to £681M
- Group sales fell 0.9% to £26.12bn
- Like-for-like sales fell 1.9%
Sainsbury has opened 98 convenience stores during the year, delivering growth of 16%. The retailer expected to continue opening new convenience stores at the rate of one to two per week.
Customer orders for its online groceries business had risen by 13% and was said to reflect further investments in the platform to improve service and availability.
Chief executive Mike Coupe said the results revealed the pressures under which retailers were operating. “It is the most challenging [retail] environment I've seen in my 30 years in the industry and I’m really enjoying it,” he told BBC Radio 4’s Today programme.
Coupe added that while consumers were benefiting from more money in their pockets, they were tending to spend that money on eating out rather than food and drink for home consumption.
Worst ever annual loss
Last month, Tesco announced a similar property revaluation to the one posted by Sainsbury today (May 6), which contributed to its worst ever annual loss of £6.4bn.
Retail analyst Planet Retail said the results confirmed the trading environment was “now the most challenging in a generation”, and predicted Sainsbury could expect a very tough 2015.
“Even on an underlying basis, Sainsbury’s trading performance continues to slip, with like-for-like declines the new normal for a retailer that, only 12-18 months ago, was leading the big four performance-wise. Sainsbury’s is feeling the pressure from discounters continuing to lure away more affluent shoppers coupled with Tesco’s nascent domestic recovery,” said the analyst’s David Gray.
“As the latter gathers pace, Sainsbury’s will appear increasingly vulnerable.”
Meanwhile, read Coupe's comments on his conviction for embezzlement in an Egyptian court, following Sainsbury’s failed joint venture in the country, and his forthcoming appeal hearing here.