Belfast Telegraph

Sainsbury’s unveils five-year plan to cut costs by £500 million

The group also announced a 0.2% fall in like-for-like sales, excluding fuel, over its second quarter to September 21.

The supermarket giant has unveiled a new five-year plan (PA)
The supermarket giant has unveiled a new five-year plan (PA)

By Holly Williams, PA Deputy City Editor and Simon Neville, PA City Editor

Sainsbury’s is attempting to put its ill-fated takeover of Asda behind it with a new five-year plan to turn around the business and cut costs.

Speaking to analysts following a store tour in Southampton, bosses said they will close 125 Argos stores and supermarkets but open even more amid an overhaul to slash costs.

The group said it will shut up to 70 Argos shops and open around 80 instead within its supermarkets, while it also plans to close up to 15 large supermarkets and as many as 40 convenience stores.

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Sainsbury’s chief executive Mike Coupe (Sainsbury’s/PA)

It also said it will open around 10 big stores and some 110 convenience outlets under the plan, which it insisted will increase its store estate.

Chief executive Mike Coupe was asked repeatedly how many staff would be affected by the changes, which stores are set to close, where the new sites could be located, or when workers would be informed if their store is safe. He declined to comment, only saying “we think it’s a good news story for our colleagues”.

Finance chief Kevin O’Byrne said: “These are stores we don’t see a long-term future for.”

The company explained it reviews all properties every five years to identify which stores are underperforming, and acts accordingly.

However, sources said the decision on which stores has not been made and they will close “over a period of time” during the next five years.

The plan, being led by Mr Coupe, is set to cut costs by around £500 million over the next five years and comes after the failure of its ill-fated £7.3 billion takeover tilt for rival Asda.

Sainsbury’s also revealed narrowed sales declines in its second quarter, but warned over a £50 million hit to underlying half-year profits.

It blamed the interim profits warning on the impact of cost cutting, with weather and higher marketing costs also taking their toll, though it stuck by full-year forecasts.

Sainsbury’s also announced its financial services arm would stop new mortgage lending “immediately” as part of its five-year plan.

The company is considering its options for its mortgage book of 7,000 customers, including a potential sale, following rival Tesco’s recent move to offload its home lending business.

Bosses also said they do not plan to put any more cash into funding Sainsbury’s Bank.

Other details to emerge from the presentation included plans to continue cutting costs – highlighting that Sainsbury’s has reduced prices against Aldi by 7.2%.

A major overhaul of the supermarket’s “basics” range is also ongoing and will be expanded after the company admitted the budget lines had been underperforming.

Tesco relaunched its “value” range in 2016, creating a series of fictional brands, replacing the “Everyday Value” labelling, and some of the products displayed by Sainsbury’s appeared to be taking inspiration from its rival.

The J.James & Family Cooking Bacon brand has already proved popular, bosses said, and they will also be rebranding its Taste The Difference range.

Elsewhere in the business, bosses said they would be introducing new technology to make shopping easier and had improved availability after a overhaul of store staff roles led to some sites running out of stock.

Details of the plans came as Sainsbury’s announced a 0.2% fall in like-for-like sales, excluding fuel, over its second quarter to September 21.

This marked an improvement on the 1.6% fall seen in the previous three months.

Sainsbury’s said like-for-like grocery sales rose by 0.6% in the second quarter, but this was offset by a 2% drop in general merchandise sales – which includes the Argos business.

Mr Coupe said: “Sales momentum was stronger in all areas and we further improved our performance relative to our competitors, particularly in grocery.

“Argos continued to grow market share in key categories, but sales were impacted by reduced promotional activity and the timing of new product releases in gaming and toys.”

Sainsbury’s also said it would reduce its debts by £750 million over the next three years.

PA

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