Argos pushes Sainsbury's sales higher while earnings sink

Supermarket chain and retail group J Sainsbury posted its preliminary results for the year to 11 March on Wednesday, with group sales - including VAT - up 12.7% to £29.11bn, which the board said was mainly as a result of the contribution from its 2016 acquisition Argos.

The FTSE 100 firm said underlying profit before tax was down 1% at £581m, reflecting its investment in the customer offer and cost inflation, offset by cost savings of £130m and a contribution from Argos of £77m.

Underlying basic earnings per share fell 9.9% to 21.8p, and the board confirmed a full year dividend per share of 10.2p - a 15.7% reduction, reflecting dilution due to new shares issued to Home Retail Group shareholders on the acquisition of Argos.

The proposed final dividend was 6.6p, a fall of 18.5% year-on-year.

Net debt stood at £1.48bn, an improvement of £349m, and return on capital employed was reported at 8.8%.

“This has been a pivotal year and we have made significant progress delivering and accelerating our strategy,” said group chief executive Mike Coupe.

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

“Our food business remains resilient in a challenging market and we continue to innovate in quality and to invest in price.”

Coupe said the group was also investing in growth areas of the business to “meet the changing ways that customers shop”, with the firm’s design-led general merchandise and clothing operations both outperforming the market, and the board reporting “strong growth” in Sainsbury's Groceries Online and convenience channels.

“We are pleased with the progress made since we acquired Argos.

“We have opened 59 Argos Digital stores in Sainsbury's supermarkets and they are performing well.

“We are therefore accelerating our plan to open a total of 250 Argos Digital stores in Sainsbury's supermarkets and will deliver our £160m EBITDA synergy target by March 2019, six months ahead of schedule.”

Sainsbury's Bank achieved an important milestone with the migration of savings customers and ATMs onto its new banking platform, Coupe added, saying the board was confident in the growth opportunities at Sainsbury's Bank and remained “well set” to deliver strong profit growth.

“We continue to find ways to simplify our business and reduce costs.

“We are on track to deliver our three-year £500m cost saving programme by the end of 2017/18 and we will deliver a further £500m of cost savings over three years from 2018/19.

“We benefit from a strong balance sheet and have reduced our net debt by £349m to £1,477m.”

Coupe quipped that the “quality and range” of Sainsbury’s products, combined with its “market-leading” service, availability and channels set it apart from competitors.

“Our values support our growth and our vision to be the most trusted retailer where people love to work and shop.

“I would like to thank our 195,000 colleagues across the group for the difference they make to our customers every day.”