(Alliance News) - J Sainsbury PLC on Wednesday said it swung to an annual loss as restructuring expenses and nearly GBP500 million in virus-related costs offset a sales rise.
In the year ended March 8, the London-based grocer's revenue rose 0.2% to GBP29.04 billion, from GBP28.99 billion. It swung to a pretax loss of GBP261 million from the prior year's GBP255 million profit.
Underlying pretax profit fell 39% to GBP356 million, topping consensus of GBP338 million as well as the company's own forecast of GBP330 million. Profit was hit by GBP485 million of direct Covid-19 costs, offsetting a strong sales performance excluding fuel. Fuel sales were hurt by reduced demand during lockdown and the impact of lower crude oil prices on the petrol sales price.
Grocery sales were up 7.8%, general merchandise sales up 8.3%, and digital sales doubled. Fuel sales dropped by 39%, however, and Financial Services sales by 24%.
Sainsbury's booked GBP423 million in costs related to its restructuring programme, more than doubled from GBP202 million the year before. It also reported GBP220 million in impairment costs, up 75%.
In November, the company said it will close around 420 Argos standalone stores, reducing the standalone estate to just 100 by March 2024. However, it will open 150 more Argos stores in Sainsbury's supermarkets by that target date, as well as 150 to 200 more Argos collection points in supermarkets and convenience stores. It confirmed that as part of its cost-cutting plans, "around 3,500" jobs could be lost.
"We have made good early progress with the plan we announced in November to put food back at the heart of Sainsbury's. We are changing at pace, making bold decisions and investing in the areas that matter to customers, underpinned by an accelerated cost saving programme. Throughout the pandemic we have remained focused on delivering against this plan and have built good momentum," the company said on Wednesday.
Sainsbury's proposed a 7.4 pence per share final payout, taking its regular payout for the year to 10.6p per share. It had deferred its final dividend this time last year due to Covid-19. Instead, it paid a 7.3p special dividend in lieu of the final dividend it did not propose. Adding that special payout to the prior year's 3.3p interim dividend gives a total shareholder return of 10.6p, so the company's dividend for financial 2021 was unchanged year-on-year.
"This year's financial results have been heavily influenced by the pandemic. Food and Argos sales are significantly higher, but the cost of keeping colleagues and customers safe during the pandemic has been high," said Chief Executive Simon Roberts.
"We have a bold three-year plan to put food back at the heart of Sainsbury's and drive improved performance," said Roberts. "We are transforming the way we workn and I am encouraged by how all of our teams have responded and the early momentum and performance towards our plan."
Sainsbury's said it has carried good momentum into the new year, but noted it will come up against tough year-on-year comparatives as customer behaviour normalises from the panic buying at the start of the pandemic last year.
Sainsbury's expects underlying pretax profit in the year to March 2022 to exceed the GBP586 million reported in the 2020 financial year, and it is "comfortable" with consensus of around GBP620 million.
Shares were 2.1% lower at 237.00p each in London on Wednesday morning, one of the worst blue-chip performers.
By Eric Cunha; ericcunha@alliancenews.com
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