London: J Sainsbury Plc took a £46mil (US$60mil) hit on its failed deal to acquire Walmart Inc’s Asda and vowed to invest in improving its stores as it prepares to fight the UK’s supermarket wars alone.
The UK grocer’s Plan B after antitrust regulators blocked the deal got a small boost yesterday as Sainsbury reported a full-year profit slightly above analysts’ expectations.
Chief executive officer Mike Coupe is clinging on for now, even though he had described the merger as essential to the company’s future.
Without Asda, cutting prices “becomes a little bit more challenging – there’s no doubt in that and it’s something we’re going to have to deal with,” chief financial officer Kevin O’Byrne said in an interview with Bloomberg TV.
“We could have done more for customers faster. It will just take a little longer now.”
Sainsbury has been losing market share to UK supermarket leader Tesco Plc and German discounters Aldi and Lidl, as Amazon.com Inc. and online grocer Ocado Group Plc make inroads in the food business.
The costs for the Asda deal through legal, banking and other fees dented its full-year profit, but underlying retail earnings were up 11% on an operating basis.
Comparable sales excluding fuel fell 0.2%, though Sainsbury got a boost from its recently acquired Argos houseware business.
Sainsbury pledged new investments aimed at sprucing up its stores, cutting prices and building its digital business, without detailing how much it will spend.
The supermarkets have faced criticism for declining standards and product shortages.
Coupe had pledged £1bil in price cuts if the merger had gone ahead.
The company, which has a roughly 15% share of the UK grocery business, said it would make improvements at more than 400 supermarkets this year.
It’s also integrating them with Argos stores to generate synergies.
Over the past year Sainsbury has already revamped its supermarket operations, streamlining their management, as it responds to the cost challenge posed by the discounters. Rival Tesco is closing fresh-food counters at some of its stores and has introduced a cut-price store brand.The shares have fallen 28% over the past 12 months, wiping £2bil off Sainsbury’s market value. — Bloomberg