The UK’s number three supermarket, Sainsbury’s, today unveiled solid annual pretax profit growth despite a slowing of like-for-like sales.
The London-based chain, which is involved in the five-way takeover battle for rival Safeway, fulfilled a pledge to shareholders by raising its dividend by 5% Sainsbury’s had promised to boost the payout if it achieved double-digit percentage profits growth by the end of the year.
Underlying pretax profits in the year to 29 March were up 10.8% at £695m compared with £637m in 2002.
Like-for-like sales growth did not fare so well, hitting 2.3% for the period compared with 6.3% last year in what chief executive Sir
Peter Davis called “increasingly tougher market conditions”.
He said: “In the UK we have made significant achievements in modernising our business through our transformation programme and ontinued to deliver an improved sales performance despite more normal market growth following the previous year’s buoyant conditions.”
Sir Peter, who took over at the group three years ago and will take the chairman’s post in March 2004, is part-way through a recovery drive to close the gap on market leader Tesco.
He added: “Overall we remain confident we are making real progress across the group the achieve our targets.”
Sainsbury’s has been working to improve customer service after a period of slower sales in the fourth quarter of the year.
Today the group said it will have created 10,000 new jobs by June in an effort to cut queuing time at its checkouts.
The initiative, launched in April, has seen “encouraging results” so far with queue lengths cut by half a person saving customers time when they shop.
The supermarket also launched a promotional campaign to highlight its fresh food offering which will spearhead a major drive throughout the summer with new products and promotions.
Sir Peter said this would be followed in the autumn by a campaign promoting Sainbury’s non-food offerings as it prepares to sell more kitchen products, homeware and health and beauty lines to drive sales growth.
Sir Peter had previously predicted 2003 would be the most intensive period of the business transformation programme.
During the year, Sainsbury’s delivered £210 million of cost savings and said it was on track to achieve £700m by March 2004.
The company opened 15 new supermarkets and 24 Local stores in the 12 months, as well as undertaking 40 store refurbishments and 29 extensions.
Sainsbury’s Bank saw its growth strategy pay off with customer numbers up by 29% on the year.
The Sainsbury’s To You home shopping service is on track to break even in the second half of 2003/04 with sales ahead by 71% for the period.
Sir Peter added that Shaw’s supermarket operation in the US saw sales ahead by 1.2%, with like-for-like sales growth of 0.9%.
On Sainsbury’s potential bid for Safeway, the company said it had a strong case.
“Our differentiated offer of quality products and greater choice at competitive prices offers a real alternative to price-based operators,” Sainsbury’s said in a statement.
“We believe the next few months could see significant change in the food retailing market and we are poised to take advantage.”
Retail entrepreneur Philip Green is current favourite with City bookmakers to win Safeway’s hand with Wal-Mart-owned Asda a close second.
References: EGi News 21/05/03
