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Last Updated: Wednesday, 18 May, 2005, 12:51 GMT 13:51 UK
Profits collapse at Sainsbury's
Sainsbury's tills
Sainsbury's says it is in the early stages of "long-term recovery"
Supermarket group Sainsbury's has unveiled a sharp slide in profits, but added that sales were improving.

Pre-tax profits for the year to March fell to 15m from 610m a year earlier, the group said.

Meanwhile, total sales rose 5.5% to 16bn in the wake of the group's drive to draw in more customers.

Sainsbury has been working hard to improve stock availability, by tackling IT and delivery problems which had badly disrupted its supply chain.

The company added that the trading environment remained tough, but it remained on track following the launch of its three-year recovery plan - Make Sainsbury's Great Again.

Sainsbury's shares closed down 0.2% at 288.5 pence.

'Improvement'

The plan ate into the group's funds, swallowing a total of 510m since its launch in October, as Sainsbury's reviewed its supply lines, stores and product offers. The company added that the changes would cost a further 50m over the current year.

Market monitoring shows that our growth continues month on month
Justin King, Sainsbury's chief executive

However, the firm added that like-for-like sales improved after it launched the shake-up - despite falling 0.4% over the year to March, they increased 1.7% in the last three months of the year.

The group also sold off its US business Shaw's supermarkets, raising 275m.

Underlying profits for the year were 254m compared with 675m last year.

"We have made good progress and can see early signs of improvement in our customer offer and sales," chief executive Justin King said.

"We are on track but still in the very early stages of a long-term recovery programme."

'Less affected'

The results came as the company launched a drive to recruit 10,000 shop workers aged 50 and over as part of its drive to help give customers a "quality, hassle-free festive shopping experience", the retailer said.

They are being hired to deal with the busy Christmas period.

Sainsbury's chief executive Justin King
Mr King is beginning to see the fruits of his recovery plan

Mr King also told BBC Radio 4's Today programme that he did not think that the retail slide hitting much of the UK would affect supermarkets.

"Market monitoring shows that our growth continues month on month," Mr King said.

"Food supermarkets tend to be less affected by the ups and downs of the retail market than other retailers on the High Street."

There are signs that Mr King's shake-up is beginning to pay dividends.

Supply boost

Stock availability has begun to improve - previously the firm had suffered, as problems with its supply chain left it struggling to get goods on its shelves.

Also, recent data from market analysts TNS showed its market share had stabilised at close to 16%, leaving the firm in third place behind Tesco and Wal-Mart-owned Asda.

Everything seems to be on track, which I think will be taken positively
Sanjay Vidyarthi, analyst at Teather & Greenwood

In an effort to reach its target of improving sales by 2.5bn by 2007/8, the group says it plans to invest 400m over the next three years on improving pricing, product quality and customer service.

So far, the group has cut prices on a total of 7,000 goods as part of the drive.

Meanwhile, it added that its Active Kids promotion, giving out vouchers for school exercise equipment, had resulted in a significant improvement in fresh fruit and vegetable sales.

Looking ahead, the group added it aimed to cut costs by 100m over the coming year - tackling stock loss costs, IT systems and central costs.

Under the drive, the group has closed nine unprofitable convenience stores and plans to axe a further two in June.

However, it has ditched plans to shut down a twelfth store, believing that a revamp will return the site to profit.

Sanjay Vidyarthi, an analyst at brokers Teather & Greenwood, said. "Everything seems to be on track, which I think will be taken positively."


Your comments

I think Sainsbury's has improved over the last few months and their fruit and veg quality is far superior to Tesco.
Sandra Clark, London Colney/St Albans, UK

I find our local Sainsbury's store is pleasanter to shop in than the local Tesco. In my opinion, it also has a nicer choice of food, including a kosher counter (that Tesco doesn't have at all).
Mike, Southend on Sea, Essex

Sainsbury's should think about setting themselves apart from the competition. I would like to see more organic produce and more concern for the environment and the humble farmer.
Graham Holton, London

Shopping at Sainsbury's is now far better, you can now get what you want and it tastes great. The changes in store have been fabulous and I now have much more money left in my wallet. Well done Justin.
Scott Withey, Durham

I have shopped at Sainsbury's for all of my life (30ys+). A year ago we moved house and our nearest supermarket turned out to be Asda. We began shopping there on a regular basis and found prices very competitive. However, after about six months, I began to see the difference between Asda and Sainsbury's: In Asda, we could never get everything in one shop due to empty shelves. And Asda doesn't carry special offers, such as three-for-two etc. Sainsbury's is full of these and we now shop in Sainsbury's. Good Luck Sainsbury's, you have my support.
Mr Sheikh, East Barnet, Herts, UK

I regularly have to queue for over 20 minutes in my local Sainsbury's, by which time I could have eaten most of the food in my basket! If Sainsbury's wasn't the only supermarket in the centre of town it would have been thrashed years ago! Where is Asda when you need them?
Ian Howlett, Oxford, UK

This store is very badly supplied with fresh produce and delicatessen items. I visit the store at 5pm each Thursday, a peak shopping period and regularly am unable to complete my shopping list. I make a point of purchasing the outstanding items at a competitors store rather than being compromised. I regularly filled in the complaints book so now they have withdrawn it. The check out queues are unacceptable due to staff shortages I am told. I would recommend sacking the store manager and monitoring for improvements as these faults are all the things that Mr King set out to address two years ago.
John Shaw, Apsley, Herts

I walked into my local Sainsbury's Central at 1pm last Saturday to pick up six basic items that I needed but didn't have time to get to the much cheaper Tescos out of town. 10 minutes later after discovering that the first four items I required were out of stock (milk, butter, bread, coffee) I walked out, resolving never to enter another Sainsbury's store as long as I live. Had that been a one off occurrence I could have put it down to bad luck. But that was not the first time this year that this has happened and enough is enough. Half your prices and stock your shelves Sainsbury's. You may start acquiring customers rather than driving us away.
Andy, Cardiff

I shop at Sainsbury's regularly, but as a single person with no children I am disappointed that petrol vouchers are not available whilst the kids active campaign is on. I praise the fact that something is being done for children but it seems another example of being single and childless you don't get many benefits aimed at you....
A Davies, Norwich

Being a Sainsbury's employee, I have seen a significant improvement in both the price of goods, which is slowly becoming more comparable to other supermarkets, or the availability of goods. A year ago today Sainsbury's seemed like it was on a downward spiral with no end in sight. Now i feel confident in saying that there is light at the end of the tunnel!
Anon, Coventry

We are forced by circumstances to shop at Sainsbury's and have found that standards have dropped considerably. Many items of an essential nature are absent from shelves, mainly as a result of offers that mean that the early bird gets the worm, and restocking is not being done. I have also found that when requesting an item off a shelf from an assistant that I'm met with the reply of if it's not there, we haven't got any.
Mr A H Lewin, Brighton, E Sussex

Our family shops at Sainsbury's but we haven't seen much improvement.
Don Hayman, Oxford, England

Sainsbury's is good for finding high quality products that are hard to get elsewhere. Also they sell nice china and household goods, but the everyday items are not as good on price as Tesco is. Also the fruit and veg is poor quality and over priced. As a big fresh produce eater this stops me from using Sainsbury's as my main supermarket.
Kevin Fusher, Truro, Cornwall

I used to shop at Sainsbury's. On a Saturday morning it's nice and quiet, and the staff were paid to be friendly. But week after week with key products being out of stock led me to try Morrisons. Okay, it's more crowded and the checkouts are slower, and the quality not quite Sainsbury's, but every week I get home with everything I went out to buy.
Stephen, Stockport, United Kingdom




BBC NEWS: VIDEO AND AUDIO
Why Sainsbury's pre-tax profits fell so sharply



SEE ALSO:
Improved supply lifts Sainsbury's
24 Mar 05 |  Business
New finance chief at Sainsbury's
14 Mar 05 |  Business
Sainsbury's food decline slowing
13 Jan 05 |  Business
Sainsbury seeks to soothe on pay
23 Dec 04 |  Business


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