Sainsbury’s followed its rivals into the red as it blamed a year of “unprecedented” change for the company’s first loss in a decade.
A fortnight after Tesco’s £6.4 billion annual loss, Sainsbury’s registered a more modest deficit of £72 million, with the figure dragged lower by a one-off write-down of £628m on the value of its property estate.
Even when stripping out exceptional items, the grocer’s 14.7 per cent fall in underlying profits to £681m was the first decline since the start of former boss Justin King’s successful turnaround strategy in 2005.
His successor Mike Coupe, who took over from Mr King in July, reported a 1.9 per cent drop in like-for-like sales for the year to March 14 and said food price deflation meant the chain did not expect an improvement this year.
He said: “The UK marketplace is changing faster than at any time in the past 30 years which has impacted our profits, like-for-like sales and market share.
“However, we are making good progress with our strategy, and our investment in price and quality is showing encouraging early signs of volume and transaction growth.”
The company also cut its full-year dividend for shareholders by 23.7 per cent.
The value of the company’s property decreased during the year by £900m to £11.1bn, mainly due to a reduction in market rental values. The group has 597 supermarkets and 707 convenience shops.
It is slowing its expansion and expects to deliver around 450,000 sq ft of gross new space, with one to two new convenience store openings per week. This compares with the addition of 733,000 sq ft of selling space in the previous year, when it opened eight new supermarkets and 98 convenience stores.
Britain’s big four grocers - including Tesco, Morrisons and US-owned Asda - are engaged in fierce competition as they scramble for market share, which is being eaten away by discounters Aldi and Lidl.
Morrisons recently reported a full-year loss of £792m.
In November, Mr Coupe unveiled a wide-ranging plan to fight back against the discounters, including a £150m investment in price cuts over the next year and an improvement in the quality of 3,000 own-brand products.
He is also looking for cost savings of £500m over the next three years.
Mr Coupe has pointed out that a quarter of its stores have under-used space and over the next five years this will be used to expand non-food goods and also be given over for in-store concession partnerships.