Sainsbury's has posted a fall in pre-tax profits despite a rise in sales, as conditions remain 'challenging'.
The supermarket made a pre-tax profit of £788 million in the 52 weeks to 16 March, a figure which was down 1.4 per cent on the previous 12 months due to property disposals. Profits from the sale of property fell from £83 million to £66 million, and the group wrote the value of its remaining property assets down by £10 million. Underlying profits, however, were up 6.2 per cent. Total sales over the year rose 4.6 per cent to £25.63 billion, boosted by what the retailer termed the 'milestone' of non-food sales reaching £1 billion for the first time ever. During the year, Sainsbury's grew its share of the market from 16.5 per cent to 16.6 per cent for the 52 weeks ended 17 March 2013 according to Kantar.
Sainsbury's also announced that they will pay Lloyd's banking group £248 million to take full ownership of the Sainsbury's Bank, which had been in 50/50 ownership between the two. According to chief executive Justin King, "Our decision to take full ownership of Sainsbury's Bank will add further momentum to our strategy of developing complementary channels for the benefit of both customers and shareholders." In the annual report, the supermarket drew attention to its decision to to reward Sainsbury's shoppers with double nectar points for choosing to bank with Sainsbury's bank. Further, the report noted that 'Nectar also plays a vital role in the Bank's marketing'.
Noting that 'Convenience continues to be a key driver of consumer behavior', the retailer pointed to its increased investment in convenience estate, with 73 stores added during the year - hitting a target of one to two a week - and sales of over £1.5 billion in the sector. However, in March 2012 Sainsbury's took the decision to close the 'FreshKitchen' food-to-go format, stating that 'While performance of the store was satisfactory, we concluded that the market opportunity was smaller than anticipated'. Annual online grocery sales hit almost £1 billion with over 165,000 orders placed weekly on its online operations and over 900 click and collect stores. Sainsbury's loyalty program 'Nectar' continues to be a successful customer draw, with over 22 million customer transactions a week, an increase of one million on last year.
Commenting on the results Sainsbury's chief executive Justin King noted that "Whilst we see no near term change in the current economic situation, we remain confident that by continuing to invest in our long-standing strategy and by understanding and helping our customers, we are well positioned for future growth."
© 2013 - ESM: European Supermarket Magazine by Ellen Lunney
