SAINSBURY’s boss Mike Coupe has insisted the company can prosper in a tough market after its proposed £7.3 billion takeover of Asda fell apart, with store improvements and more competitive pricing of core commodities planned.
Speaking after the supermarket giant posted a 7.8 per cent increase in annual underlying profits to £635m, Mr Coupe admitted the competition watchdog’s decision last week to block the planned combination with Asda had been a big setback.
Read more: Blocking Asda merger will cost consumers £1bn claims Sainsbury's boss
“Of course we’re disappointed and I’m personally disappointed and it would be foolish to say otherwise,” he told reporters.
However, noting the Competitions and Markets Authority had in February signalled it was not going to approve the deal, Mr Coupe appeared confident Sainsbury’s could overcome the setback.
“I am confident in our strategy and also clear on what we need to do to continue to evolve the business in a highly competitive market where shopping habits continue to change,” he said.
Sainsbury’s, which operates around 100 stores in Scotland, is grappling with the challenges posed by the rise of German discounters Aldi and Lidl as well as the emergence of online competition from the likes of Amazon.
Read more: Aldi toasts record UK Christmas sales
The group said: “With greater access to a variety of shopping channels, the UK consumer has more flexibility and choice than ever in how and when they shop for food, general merchandise and clothing.”
The challenges have been compounded by the pressure on consumer confidence resulting from continued uncertainty regarding Brexit.
Mr Coupe’s strategy will involve investing to improve over 400 supermarkets this year to encourage shoppers to use the group’s outlets, while trying to ensure its offer is competitive and responds to changing consumer habits.
Read more: Sainsbury's sees cautious consumer spending hit Christmas sales
“We can and will invest in making our core commodities more competitive,” noted Mr Coupe, adding: “Clearly it will take longer than if the Asda transaction had gone through.”
However, he said with customers continuing to rate the group top for quality food the company is also growing its premium ranges.
Noting that £4.7bn of revenue now comes from online, Mr Coupe said the group is increasing investment in technology to make shopping across Sainsbury’s, Argos and the Sainsbury’s Bank operation as quick and convenient as possible.
Profits fell to £31m at the Edinburgh-based Sainsbury’s Bank operation from £69m in the preceding year.
The group noted the impact of additional bad debt charges which were largely due to the adoption of the new IFRS 9 accounting standard, a more cautious approach to unsecured lending and cost increases.The number of active bank customers rose by 5% year-on-year to 2.02 million, from 1.92m.
The drive to offer customers easier access to financial services featured on the list of strategic priorities included in yesterday’s results announcement.
Besides differentiating the group’s food and grocery offer through quality, value and service, others include growing general merchandise and clothing and generating efficiencies to support investment in digital.
Read more: Sainsbury's 'weighed up shock move' for Mothercare
The acquisition of Argos in 2016 has helped with the latter two. The group said it completed the integration of Argos in the year to March 9, delivering £160m in annual synergies ahead of schedule.
Group sales rose 2% annually to £32.4 billion but like-for-like sales fell 0.2% .
Statutory after-tax profits fell to £219m, from £309m, weighed down by £396m of charges, including £46m in costs for the ill-fated Asda deal.
Sainsbury’s declared a final dividend of 7.9 pence per share, bringing the full year total to 11p per share, up 7.8% on the preceding year.
Shares in the group closed up 4%, 8.7p, at 231.2p.
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