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Wednesday, October 28, 1998 Published at 11:07 GMT

Business: The Company File

Sainsbury warns of shopping 'stagnation'

Supermarket sweep for Sainsbury

Food retail giant J Sainsbury has issued a warning over stagnating sales as falling consumer confidence hits business.

The warning came as the company announced a half-year pre-tax profit of £455m.

Although the profit result was 15% up on the same period last year and in line with forecasts, the bleak sales outlook caused Sainsbury's share price to fall 34 pence to 525p in opening trade.

A similar result and warning from brewer and pub owner Whitbread has added to the retail gloom and helped drag down the share market.

Whitbread said sales at its Beefeater pub restaurants had fallen 4.3% as consumers cut bcak on eating out.

Disappointing sales

In the last five weeks Sainsbury's sales in both its supermarkets and Homebase DIY stores have stopped growing.

[ image: A healthy outlook for supermarkets]
A healthy outlook for supermarkets
The group says trading has become increasingly difficult and that the DIY market is suffering from a continued downturn

With 378 food stores and 298 DIY outlets and 174,000 employees, the company was overtaken as the largest supermarket by Tesco four years ago.

But Group Chief Executive Dino Adriano warned market conditions had become increasingly difficult since the start of the second half of the year.

He said the company was "encouraged" by its performance in supermarkets, where it has been trying to emphasise its value for money offer, but added "there is still more to achieve."

Sainsbury said its Homebase DIY stores, current same-store sales were down 0.9% but added it had held market share as overall DIY spending slipped. It said it expected to outperform the market in the second half.

Shareholders will pick up an interim dividend of 4.02p a share, up from 3.75p in the same period last year.

The figures were the first to be released by the company without having a member of the Sainsbury family at the helm. Lord Sainsbury of Turville resigned in May.

Fair Trading?

Sainbury's profits up but OFT might scrutinise supermarket figures
But Sainsburys high profit margin will fuel speculation of the outcome of an investigation by the consumer watchdog, the Office for Fair Trading (OFT), into supermarket profits.

An interim report by the OFT found that supermarket profits in the UK are three times as high as in other EU countries, fuelling the belief that they are damaging suppliers and producers and not cutting the costs for consumers despite huge profits.

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