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Retail

Sainsbury's Profit Falls 15% After Failure Of Asda Deal

By Dayeeta Das
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Sainsbury's Profit Falls 15% After Failure Of Asda Deal

British supermarket group Sainsbury's reported a 15% fall in first-half profit, blaming the combined impact of the phasing of cost savings, higher marketing costs and tough weather comparatives with last year which impacted on sales.

The 150-year old group did, however, forecast on Thursday that second half profits would benefit from the annualisation of last year's staff wage increase and a normalisation of marketing costs and weather comparatives - implying it was on track to make analysts' profit consensus for the full 2019-20 year.

The first half profit fall comes as Sainsbury's tries to rebuild confidence in its strategy following a botched attempt to take over rival Asda.

Britain's competition regulator blocked the agreed £7.3 billion ($9.4 billion) deal in April and Sainsbury's shares have fallen 34% over the last year.

New Plan

In September, chief executive Mike Coupe put cost cutting and paying off debt at the heart of a new plan designed to show Sainsbury's can prosper on its own.

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The group made an underlying pretax profit of £238 million in the 28 weeks to 21 September. That compares with analysts' average forecast of £232 million but is down from £279 million made in the same period last year.

Group sales fell 0.2% to £16.86 billion, with like-for-like sales, excluding fuel, down 1.0%.

Prior to the update analysts were on average forecasting a 2019-20 pretax profit of £584 million, down from £601 million in 2018-19.

Sainsbury's reported a statutory pretax profit of just £9 million for the first half. That reflected £229 million of one-off costs, the bulk of which follows a review of its store estate.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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