Published: Thu, May 04, 2017
Economy | By Melissa Porter

Sainsbury's warns over 'challenging' trading as profits dip to £503m

Sainsbury's warns over 'challenging' trading as profits dip to £503m

As of 08:25 BST, Sainsbury's share price had fallen 2.47 percent to 272.60p, underperforming the broader London market, with the benchmark FTSE 100 index now 0.24 percent worse off at 7,232.40 points.

Pre-tax profits, meanwhile, were down 8.2 per cent from £548 million to £503m.

Sainsbury's, which trails market leader Tesco (TSCO.L) in annual sales, cautioned that it saw no let-up in the intensely competitive United Kingdom market any time soon.

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

Total transactions had increased by almost 3% to 26 million per week.

"Food is the core of our business and we are committed to helping customers live well for less".

This was seen in the growth in Sainsbury's groceries online and convenience channels, up more than 8% and 6% respectively, while the general merchandise and clothing outperformed the market.

"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.

Mr Coupe said Sainsbury's was pleased with progress since snapping up Argos, having opened 59 Argos Digital stores in its supermarkets, and is now accelerating plans to open a total of 250.

After more than two years of deflation, food and fuel prices are starting to rise, driven by the devaluation of sterling and commodity price increases, and benefiting food retailers.

Supermarket Sainsbury's has warned over a hit from falling consumer confidence as price hikes start to bite after it suffered its third straight year of falling profits.

Data from research firm Kantar Worldpanel showed all supermarket sales rose 3.7%, their fastest since September 2013, in the past 12 weeks. Sainsbury's like-for-like sales fell 0.6%.

Aside from the takeover cost synergies, Sainsbury's also said it was on track to deliver its three-year, £500mln cost saving programme by the end of 2017/18, with a further £500mln cost savings target set over three years from 2018/19. GBP130 million of cost savings were made in the financial year just ended.

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