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Sainsbury 8217 s reins in shop plans

Article By: ,  Financial Analyst
November 18, 2014 4:27 PM

Sainsbury's has confirmed that it will scale back its plans for opening new stores across the country in an attempt to cope with what chief executive Mike Coupe describes as a change in shopping habits.

Coupe appeared on BBC Radio 4's Today programme to tell listeners that the company has suffered a half-year loss before tax of £290 million and that like-for-like sales have fallen 2.1 per cent during the period.

What's more, there is little good news on the horizon.

"We anticipate the next couple of years in our industry will be extremely challenging," the chief executive explained. "The reality is we are seeing deflation for the first time in probably around 10 years."

Commentators believe that people shopping more frequently and a rise in online, convenience and discount retailers has damaged Sainsbury's profits, but the supermarket chain said it will soon implement "robust plans to address this challenge".

Mothballing the new shops is said to have been costly, with Coupe explaining it had taken a total of £287 million off its profits for one-off charges administered for altering its plans. The firm also took a charge of £341m in relation to existing unprofitable and marginally profitable trading shops.

"We are acknowledging we are not going to build out as many large supermarkets as we were anticipating, so that results in the fact that the land becomes less valuable," Mr Coupe concluded.

Sainsbury's is not the only troubled supermarket chain to run into high profile problems recently. Earlier this year, Tesco's profits for this year were thrown into uncertainty when a black hole of £263 million was discovered in its profits. The news has seen chairman Sir Richard Broadbent sacked from his post and a drop in share prices at the FTSE 100 firm.

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