Sainsbury's profits dip but sales rise

Britain's third-largest supermarket - one of the only chains untainted by the recent horsemeat saga - reports a squeeze in profits as CEO Justin King dampens speculation he's about to leave.

by Elizabeth Anderson
Last Updated: 08 May 2013
‘Challenging conditions’ have been blamed for the slip in Sainsbury’s pre-tax profits, despite rising sales across the supermarket chain.

Profits fell 1.4% to £788m for the year to 16 March, while sales including fuel climbed 4.5% to £23.3bn. However, underlying profits, which ignore the impact of property sales, beat analysts' forecasts with a rise of 6.2% to £756m.

Around half of the sales growth came from Sainsbury’s online business and convenience stores, and Sainsbury’s had benefited from more customers following the fallout of the recent horsemeat scandal, CEO Justin King said. ‘Our entire supply chain, from farm to store, is built around long-term sustainable relationships to ensure the best quality products at fair prices.’

Grocery online sales almost hit the £1bn mark, while its growing convenience business took £1.5bn. Like its rivals, Sainsbury’s has focused its expansion on smaller stores, rather than large supermarkets. It is more expensive to keep convenience stores stocked, but a change in shopping habits means consumers are shopping locally, and more frequently, for their daily essentials. During the year, Sainsbury’s opened 14 new supermarkets and 87 convenience stores.

Chief executive Justin King also confirmed the supermarket chain will buy the remaining 50% share of Sainbury’s Bank from Lloyd’s Banking Group for £248m. This will be opportunity to enhance loyalty amongst its customers, he said. ‘Full ownership will allow future products to be even more tailored to Sainsbury's customers, leveraging Nectar data to drive sales uplift in both financial services and our supermarkets business.’

King also poured cold water on speculation that he is on the verge of stepping down after nine years at the helm of Britain’s third-largest supermarket.

‘I consider myself still to be a relatively young man so I've got a few more years in Sainsbury's left in me yet,’ he told Sky News.

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