Sainsbury’s has announced a shake-up aimed at saving the company £500m over the next five years, admitting it will help result in a short-term hit to profits.
Sainsbury’s said it would shut a further 70 Argos stores and relocate another 80 sites into its supermarkets.
The group said up to 15 large supermarkets would also go though it would mostly offset those losses through the opening of 10 other stores.
It also planned to close up to 40 convenience sites but open 110 more.
Sainsbury’s too also followed rival Tesco Bank by saying it had stopped new mortgage lending amid tough competition and weak rates in the sector.
The update was issued as the group announced an improved 0.2% fall in like-for-like sales over the 12 weeks to 21 September – its second quarter.
It pointed to “improved growth momentum” with total retail sales rising o.1% on the same period last year – driven by grocery and clothing.
General merchandise sales were 2% lower.
The company maintained its full-year outlook despite saying underlying profit before tax in its first half was expected to come in £50m lower on a year ago.
It blamed “the combined impacts of the phasing of cost savings, unseasonal weather against a strong comparative period last year and higher marketing costs”.
Shares were more than 1% higher in early deals on the FTSE 100 as investors welcomed the pick-up in trading and cost-cutting plan.
Chief executive Mike Coupe had been accused, in some quarters, of taking his eye off the ball during a period of turbulent trading as he pursued a £13bn merger with Asda that was eventually blocked by the competition authorities.
He told investors on Wednesday: “Sales momentum was stronger in all areas and we further improved our performance relative to our competitors, particularly in Grocery.
“We have focused on reducing prices on every day food and grocery products and expanding our range of value brands, which have been very popular with customers.
“At the same time, we are investing significantly in our supermarkets, driving consistent improvements to service and availability.”
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