Newspaper article The Journal (Newcastle, England)

Sainsbury's Cuts Store Openings; RETAIL

Newspaper article The Journal (Newcastle, England)

Sainsbury's Cuts Store Openings; RETAIL

Article excerpt

Byline: ROGER BAIRD AND GRAEME EVANS business@ncjmedia.co.uk

SAINSBURY'S has scaled back plans for new stores after warning that the squeeze on the supermarket industry will last for another few years.

The chain is mothballing a number of schemes in its property pipeline and plans to reduce the amount of money spent on new space over the next three years as it concentrates on the fight against discount rivals.

The cost of writing down the value of existing stores and those sites which will no longer be developed meant the supermarket giant plunged to a loss of PS290m in the six months to September 27. Underlying profits were better than expected at PS375m but this was still 6.3% lower than a year earlier as the company warned that its annual dividend payment to shareholders may have to be cut.

Shares plunged 5% and have fallen by 38% in the last year after the company warned that its profitability will deteriorate in the current half year period.

Mike Coupe, the company's former commercial director who took over from Justin King as chief executive in the summer, said the industry was facing a once-in-a-generation combination of cyclical and structural change as customers use online, convenience and discount channels more often.

The company said: "We expect supermarket like-for-like sales in the sector to be negative for the next few years, but we have robust plans to address this challenge."

Unveiling a strategy review, Mr Coupe plans to invest PS150m in price cuts over the next year and improve the quality of 3,000 own-brand products. He said a quarter of its stores have under-used space and over the next five years this will be used to expand its non-food goods and also be given over for in-store concession partnerships.

Sainsbury's will look for cost savings of PS500m over the next three years and will reduce annual capital expenditure to as low as PS500m over the next three years, compared with around PS950m a year since 2012/13. …

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