Sainsbury's sales slide after challenging year

Sainsbury's supermarket in Barkinside Essex

Sainsbury's has reported lower annual profits amid a "challenging" grocery market and warned it could be five years before it again sees steady growth in earnings.

Sainsbury's, which bought Argos for £1.4 billion last year, said underlying pre-tax profit fell 1% to £581 million in the year to March 11.

While Sainsbury's said the impact of Brexit remains uncertain, it is helping suppliers to improve their productivity and scrapping night shifts in hundreds of supermarkets to reduce costs.

"This has been a pivotal year and we have made significant progress delivering and accelerating our strategy", said group chief executive Mike Coupe.

Coupe has already opened three-score Argos Digital stores in Sainsbury's bigger outlets, and so pleased is he with the performance that he is ramping up plans to open 250 in all.

"Today's results from Sainsbury show some promising early signs from the Argos acquisition set against a hard trading environment for food retailing", Simon Gergel, CIO UK Equities at Allianz Global Investors, said. Credit Suisse Group AG reaffirmed an "outperform" rating and set a GBX 305 ($3.94) price objective on shares of J Sainsbury plc in a research note on Monday, March 20th. "Grocery rivals Tesco and Morrisons have experienced l-f-l food sales upticks of 1.3% and 1.7% respectively, which makes Sainsbury's falling l-f-ls indicate that it may be distracted by its integration of Argos".

Shares in Sainsbury's were down 5 percent at 265.5 pence at 1034 GMT, valuing the business at 5.8 billion pounds and taking the year on year decline to almost 7 percent.

The news broke earlier this Wednesday that the second largest supermarket Sainsbury was massively losing in the first three months of the year.

Sainsbury's is forecasting cost price inflation of 2 to 3 per cent over the financial year ahead. While this has benefited food retail market growth, general merchandise and clothing sales growth have been impacted by reduced consumer confidence and a marked slowdown in real pay growth. "Economic commentators are divided on the implications for the United Kingdom economy, but there are fears that this slowdown in real income might drive a reduction in GDP growth, an increase in unemployment and a reduction in the rate of unsecured credit growth", the company said in a statement.

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