Sainsbury’s warns 3,500 jobs could go as it plans major restructure
As part of its half year results, J Sainsbury plc revealed total retail sales were up 7.1% (excluding fuel); grocery sales increased 8.2% and general merchandise sales grew 7.4%.
Meanwhile, digital sales were up 117% to £5.8bn, equivalent to 40% of total sales, with online grocery sales up 102% in the period to 19 September 2020.
It reported loss before tax of £137m while underlying profit before tax stood at £301m.
However, the supermarket plans a major restructure in which it expects financial services returns and profits to double in five years, despite the challenges faced by Covid-19.
As part of the shake-up, it plans to:
- Close meat, fish and deli counters due to reduced customer demand
- Open 18 ‘neighbourhood hub’ convenience stores over the next three years
- Close 15 to 20 supermarkets and 50 to 60 convenience stores over the next three years while 100 convenience stores set to open
- Open up to 150 Argos stores in Sainsbury’s and add 150-200 Argos collection points in supermarkets and convenience stores
- Close around 420 Argos standalone stores, leaving it with around 100 by March 2024
- Around 3,500 jobs could go.
‘Working hard to help feed the nation through the pandemic’
Simon Roberts, chief executive of J Sainsbury plc said: “As we go into lockdown in England for the second time this year and restrictions are in place across the UK, we know our customers and colleagues are feeling anxious and we will do all we can to support them.
“Covid-19 has accelerated a number of shifts in our industry. Investments over recent years in digital and technology have laid the foundations for us to flex and adapt quickly as customers needed to shop differently. Around 19% of our sales were digital this time last year and nearly 40% of our sales are digital today.
“While we are working hard to help feed the nation through the pandemic, we have also spent time thinking about how we deliver for our customers and our shareholders over the longer term.
“We will put food back at the heart of Sainsbury’s. We are already working to make this happen – we have lowered prices on over 1,500 every day grocery products over the past few months and we will do more of this, focusing on the staple products that our customers buy every day.
“Our other brands – Argos, Habitat, Tu, Nectar and Sainsbury’s Bank – must deliver for their customers and for our shareholders in their own right. Argos sales have been strong over the past six months and we have gained almost two million new customers as people have re-connected with Argos. Over the next three years we will make Argos a simpler, more efficient and more profitable business while still offering customers great convenience and value and improving availability.”
‘Focus on growing its online business to meet customer demand’
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “J Sainsbury is on a conveyor belt of change to adapt to the way its customers now want to shop. It’s planning to shut 420 large Argos stores and also will remove deli counters from its supermarkets, given lower demand from customers for these products.
“It’ll open more Argos concessions or pick up points in every supermarket instead, increase the Habitat home ranges and step up the roll out of more mall convenience shops. With an eye on the creeping competition from value retailers Aldi and Lidl, it’s already slashed the price of 1500 items and plans to cut operating costs across the business.
“The restructure, particularly the closure of Argos stores is a £438m hit to the bottom line, pushing J Sainsbury into a loss before tax of £137 million. But a special dividend of 7.3p will be paid in lieu of final dividend and an interim dividend of 3.2p has also been announced.
“J Sainsbury clearly has a razor-sharp focus on growing its online business to meet customer demand. Given that Christmas shopping opportunities will be so limited elsewhere, the food and gift mix it offers in its physical store is also likely to help keep tills ringing during lockdown mark two.”