Sainsbury’s reins in shop plans

<p>Altering store plans has cost Sainsbury’s dearly as the firm struggles with changing consumer habits</p>

Sainsbury's has confirmed that it will scale back its plans for opening new stores across the country in an attempt to cope with what chief executive Mike Coupe describes as a change in shopping habits.

Coupe appeared on BBC Radio 4's Today programme to tell listeners that the company has suffered a half-year loss before tax of £290 million and that like-for-like sales have fallen 2.1 per cent during the period.

What's more, there is little good news on the horizon.

"We anticipate the next couple of years in our industry will be extremely challenging," the chief executive explained. "The reality is we are seeing deflation for the first time in probably around 10 years."

Commentators believe that people shopping more frequently and a rise in online, convenience and discount retailers has damaged Sainsbury's profits, but the supermarket chain said it will soon implement "robust plans to address this challenge".

Mothballing the new shops is said to have been costly, with Coupe explaining it had taken a total of £287 million off its profits for one-off charges administered for altering its plans. The firm also took a charge of £341m in relation to existing unprofitable and marginally profitable trading shops.

"We are acknowledging we are not going to build out as many large supermarkets as we were anticipating, so that results in the fact that the land becomes less valuable," Mr Coupe concluded.

Sainsbury's is not the only troubled supermarket chain to run into high profile problems recently. Earlier this year, Tesco's profits for this year were thrown into uncertainty when a black hole of £263 million was discovered in its profits. The news has seen chairman Sir Richard Broadbent sacked from his post and a drop in share prices at the FTSE 100 firm.

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.