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Last Updated: Wednesday, 17 November, 2004, 18:18 GMT
Sainsbury's makes first ever loss
Sainsbury's store
Sainsbury's has had trouble getting the formula right
Struggling supermarket firm Sainsbury's has announced what is believed to be its first ever loss.

For the six months to 9 October, it has reported a pre-tax, post-exceptionals loss of 39m ($72m), compared to a profit of 323m a year earlier.

Total sales were up 3.5% to 8.348bn, but like-for-like sales excluding petrol were down 0.9%.

Sainsbury's, which last month was at the centre of takeover speculation, is struggling to turn itself around.

Empty shelves

Excluding 168m of exceptional items, including the clearance of surplus merchandise, Sainsbury's made a pre-tax profit of 131m for the first half of its financial year.

Sainsbury's chief executive Justin King
We are clear on the actions we need to take to make Sainsbury's great again
Justin King, Sainsbury's chief executive

That was down from 366m for the same time last year, but in line with the company's recent profit warning.

Its shares closed higher on Wednesday, moving up 0.84% to 271.50, with dealers saying the figures contained "few surprises".

The company added that profits for the second half of its financial year were not expected to be significantly different from the first six months, putting the full year profits estimate between 260m and 265m.

Sainsbury's chief executive Justin King recently admitted the firm had been failing to properly stock its shelves after struggling with faulty distribution systems.

A reorganisation of the business under Mr King has already cost it 400m.

However, he said the company was now aware of where it had gone wrong in the past and was working hard to try to put things right.

Takeover rumour

"We are now beginning the implementation of the plans arising from the business review to rebuild a sustainable sales led recovery," he said.

Sainsbury's shares

Mr King said it had re-opened one of its depots "to help improve availability and deliveries", and that "new improved products" were being added to its ranges.

"We are clear on the actions we need to take to make Sainsbury's great again," he added.

And, although underlying sales are still falling, Sainsbury's repeated its recent forecast that sales would grow over the next three years.

The company is also continuing with the recruitment of 3,000 additional store staff.

Despite issuing a profits warning last month, Sainsbury's shares have risen strongly since on speculation that former Asda boss Allan Leighton is considering a takeover bid.

Simplified structure

Sainsbury's chairman Philip Hampton said he believed the retailer had the building blocks in place to achieve a turnaround.

SAINSBURY'S KEY AIMS
Increase product quality
Lower prices
Improve product availability

"We have now embarked on a sales-led recovery, which we believe will enable Sainsbury's to deliver long-term sustainable performance and profit," he said.

Among planned changes, Sainsbury's is to spend at least 400m on product quality and place more onus on fresh food and own label products, particularly its Taste the Difference and Be Good to Yourself ranges.

Store formats will also be simplified to feature only supermarkets and convenience stores, with Central and Savacentre outlets joining the main estate.

Once the UK's biggest supermarket chain, Sainsbury's has since been overtaken by both Tesco and Asda.




BBC NEWS: VIDEO AND AUDIO
Sainsbury's blame major re-organisation for the loss



SEE ALSO:
Bid talk buoys ailing Sainsbury's
01 Nov 04 |  Business
Leighton 'to bid for Sainsbury's'
31 Oct 04 |  Business
Sainsbury's heads back to basics
19 Oct 04 |  Business
Sainsbury's issues profit warning
11 Oct 04 |  Business


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