Page last updated at 08:09 GMT, Wednesday, 13 May 2009 09:09 UK

Sainsbury's to speed up expansion

Sainsbury's store
Sainsbury's has benefited as more people eat at home

Supermarket chain Sainsbury's says it will press ahead with expansion plans after reporting a small fall in profits due to a drop in property values.

Sainsbury's, which celebrates its 140th anniversary this month, said pre-tax profits fell 2.7% to £466m in the year to 21 March.

However, it said underlying profit rose 11% to £542m as sales increased.

Sainsbury's boss Justin King said that people were eating at home more and buying from cheaper product ranges.

Sainsbury's opened its first store on Drury Lane, London in 1869
In 1882 launched its own-brand products
Introduced self-service shopping in 1950
In 1870, stocked three products (butter, eggs and milk)
Now sells over 30,000 products

"Over the past 12 months consumers have become increasingly 'savvy' and have responded to rises in the cost of living by making significant changes to the mix of products they buy," Mr King said.

Sainsbury's said new store openings and extensions will enlarge floor space by more than 5% this year compared to last year's increase of 4.1%.

It said it planned to open 50 convenience stores this financial year and 100 in 2010-2011.

'Cheap and cheerful'

The company said its had it expanded its "cheap and cheerful" basics range, which was now its fastest growing brand with sales up more than 60% in the first three months of 2009. But Mr King said that people were still buying the more expensive Taste The Difference and Fair Trade ranges.

The group's expansionary plans should underpin future prospects
Richard Hunter, Hargreaves Lansdown Stockbrokers,

Sainsbury's has managed to expand its market share at the expense of larger rival Tesco, but discount chains such as Aldi and Lidl have also grown their share of the sector.

While many companies have cut dividends to conserve cash as the downturn bites, Sainsbury's said its full-year dividend would total 13.2p per share, an increase of 10% from the previous year.

Total sales rose 5.7% to £20.38bn, and like-for-like sales growth - which excludes the impact of new stores - was 4.5%.

Sainsbury's said that the economic situation would remain challenging, but said its broad range of products should ensure the company would perform well.

"Sainsbury's universal appeal gives customers the flexibility to change what they buy rather than where they shop helping them offset the current constraints on household budgets," the company said.

Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers, said that Sainbury's results were decent "if a little unexciting".

"The solidity of earnings has enabled a further addition to the dividend, whilst the group's expansionary plans should underpin future prospects," he said.

"The decline in property values is something of a concern," he added.

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