Sainsbury's posts first loss in ten years

By Arabella Mileham

Published: 06 May, 2015

Sainsbury's has posted the first loss in more than ten years, but analysts agree the annual results are better than expectations.

The retailer recorded a loss before tax of £72m in the 52 weeks to 14 March 2015, with underlying profit before tax down by 14.7 % to £681m, reflecting £713m of exceptional costs, including a previously announced £628m (non-cash) property impairment and onerous contract charge.

Group sales also fell 0.9% to £26,122m, with like-for-likes (excluding petrol) down 1.9% and retail sales also falling 0.2%.

Basic loss per share was 8.7% and Sainsbury's is recommending a final dividend of 8.2 pence per share, bringing the full year dividend to 13.2 pence per share.

However Chairman David Tyler insisted the business was built on strong foundations and it was confident it could grow shareholder value through our boosting its multi-channel offer, as well as non-core markets, including financial services, convenience, online, clothing and general merchandise.

Furthermore, the company had delivered operating cost savings of £140m in 2014/15 which was on track to reach its £500m saving over the next three years.

Chief Executive Mike Coupe admitted the changes in the market place had impacted profits, like-for-like sales and market share, but argued it was making good progress with its strategy. "Our investment in price and quality is showing encouraging early signs of volume and transaction growth."

"Sainsbury's is a fantastic business, run by an experienced management team, supported by great colleagues and underpinned by strong values. I believe we are taking the right decisions to ensure we remain fit for the future and are able to capitalise on our many growth opportunities," he said.

Volume growth has remained low across the market, Sainsbury's said and the cultural shift learned during the recession is likely to stay. As a result, it is continuing its commitment to extending its clothing, general merchandising and financial services, which it said were profitable parts of the business. Online growth is also a focus, despite growth slowing, and the store said it was on track to open its first dark store for online orders in Bromley-by-Bow in 2016.

Darren Shirley of Shore Capital said the results were above expectations.

"In line with its peers, Sainsbury is adapting to market realities and so seeking to tough it out in a very challenging market where price and gross margin investment are at the fore," he said.

Market analyst Ken Odeluga at cityindex.co.uk agreed, noting the retailer had contained impairments and write-downs within existing market assumption so there were no nasty surprises.

"There were no significant additional negatives in the final 2014 figures of the kind that Tesco decided to load its own finals with, and that, by default is a positive for the number 2 supermarket chain," he said.

He also noted the company's commentary was "noticeably more upbeat" compared to the sombre tone struck by Coupe in previous interims and this was encouraging.

"Caution remains but the supermarket felt able to communicate early signs of volume and transaction growth," he said.

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