Sainsbury’s will close 12 convenience stores and halt the roll-out of stores at Shell petrol stations as part of a wide-ranging business revamp announced today by chief executive Justin King.
The review looked at whether Sainsbury’s should move out of its £250m headquarters at 33 Holborn, which it moved into in 2002, but concluded that “the potential savings do not make an attractive enough case given the potential disruption to the organisation”.
However, it does plan to reduce headcount at Holborn with the removal of around 750 roles by March 2005. Sainsbury has already reduced staff at the head office by over 20% to around 3,000.
The UK’s third-biggest supermarket chain said that it would to take a £550m hit to profits and halve its dividend this year as it counts the cost of past mistakes and fights for survival amid intense price competition.
The one-off profit charge – most of which is write-offs on huge investments in IT systems and the supply chain – will mean that Sainsbury’s will take a massive loss this year before taking into account a £275m profit on the sale of its US Shaw’s business.
Sainsbury’s said second-half underlying profit would “not be significantly different” from the £125-£135m range forecast for the first half.
Under the catch line ‘Making Sainsbury’s Great Again’, King plans to revive the ailing retailer by getting back to basics and focusing on selling food.
The sales recovery would be underpinned by a strong balance sheet and specifically Sainsbury’s freehold and long leasehold property portfolio, the review said. The net book value of the portfolio at 27 March 2004 was in excess of £5bn, it said, adding: “Opportunities to trade stores at the margins will be explored”.
Plans for the property portfolio include the closure of seven Sainsbury’s Locals in the London area, two in the Midlands and three in Glasgow. These stores had been opened too close to existing Sainsbury’s, it said. The Bluebird concept store in London will also close. Sainsbury’s property loss on disposal will be £25m.
The roll-out of petrol station convenience outlets – which to-date has reached 24 stores – will be suspended as part of the business review.
A total of 131 of Sainsbury’s 461 supermarkets will be refurbished over the next two years.
To help ease supply chain problems, a depot at Buntingford, Herfordshire, will reopen to support the business over Christmas.
References: EGi News 19/10/04
