Sainsbury's has reported its Second Quarter Trading Statement for the 12 weeks to 21 September 2019, and shows plans for new openings and closures.
During the period there has been stronger trading across Grocery, General Merchandise and Clothing. Total retail sales rose by 0.1% (excl. fuel), with like-for-like sales down 0.2% (excl. fuel).
Grocery sales increased by 0.6%, General Merchandise sales declined by 2% and Clothing sales increased by 3.3%.
The company stated that there is a unique opportunity to structurally reduce costs by c.£500m over five years as it brings its businesses together, in addition to ongoing cost savings to cover the impact of cost inflation.
The Financial Services five year plan includes no more group capital injections after £35m in 2019/20[2], and reducing costs: income ratio to c.50%.
Store estate review and growth plans will result in: c.10 new supermarkets and 10-15 closures, and c.110 new convenience stores and 30-40 closures. Also, there will be c.80 new Argos in Sainsbury’s and 60-70 Argos closures.
Sainsbury's expects the closures to deliver an ongoing net operating profit benefit of c.£20m per year. We expect the one-off cost of closures and impairments to be £230m to £270m, of which the cash cost will be £30m to £40m
CEO Mike Coupe (pictured) said, “Sales momentum was stronger in all areas and we further improved our performance relative to our competitors, particularly in Grocery.
'We have focused on reducing prices on every day food and grocery products and expanding our range of value brands, which have been very popular with customers. At the same time, we are investing significantly in our supermarkets, driving consistent improvements to service and availability.'
The firm expects first half underlying profit before tax to reduce by c.£50m year-on-year due to the combined impacts of the phasing of cost savings, unseasonal weather against a strong comparative period last year and higher marketing costs.
However, in the second half Sainsbury's expects to benefit from the annualisation of last year’s colleague wage increase and a normalisation of marketing costs and weather comparatives.
Therefore, while retail markets remain highly competitive and the consumer outlook remains uncertain, the group remains on track to deliver full year 2019/20 underlying profit before tax in line with consensus expectations.