Supermarket outlines strategy to combat value retailers
Supermarket Sainsbury’s will cut its construction programme nearly in half in a radical change of strategy designed to address the growth of value retailers such as Aldi and Lidl.
The supermarket said in interim results announced today that its annual capital expenditure will fall to £500-550m per annum, from an average of £950m per annum over the last two years.
The move came as the supermarket conducted a strategic review which saw it write off £287m off the value of its property portfolio, mainly due to land bought which will now no longer be developed. Of this charge, £31m related to contracts it has already entered into which will not be needed.
The firm said it spent £557m on new stores and refurbishments in the first 28 weeks of the year, to 27 September. The property write down, combined with estimates of a reduction in future income, resulted in a total one-off charge of £628m. It pushed the supermarket to a pre-tax loss of £290m for the 28 weeks.
Mike Coupe, chief executive, said Sainsbury’s strategy was evolving to address shifts in shopping patterns leading to a greater emphasis on product quality and ease of shopping, and an increase in multi-channel shopping.
“We have examined every aspect of our business and we have good foundations for future growth in our supermarket and convenience estates, our online and non-food businesses and in Sainsbury’s Bank. However, we need to make sure that we are investing in the right areas and by reducing our costs and capital expenditure we are ensuring that we have the resources to enable us to do so,” he said.