Sainsbury’s profits have crashed as the supermarket giant prepares for a wave of store closures and struggles to rebuild confidence after its failed Asda takeover.
Mike Coupe, chief executive of the leading UK supermarket group (SBRY.L), also warned Brexit uncertainty “weighs heavily” on its customers and said election day would hit supermarket sales.
It saw its underlying profits slide 15% in the first half of the year, but they were down 92% when the cost of a write-down of its store estate is included.
The company blamed “the phasing of cost savings, higher marketing costs and tough weather comparatives” with last year for a drop in underlying profits to £238m.
Meanwhile like-for-like sales were down 1% to £16.86bn, according to its latest half-year report released on Thursday.
But its share price ticked up 1.6% on the announcement after the company said it was still on track to meet analysts’ expectations for the full year.
Sainsbury’s announced a major shakeup of stores in September as part of a £500m cost-cutting drive over the next five years.
It has said it will close up to 15 large supermarkets, up to 40 convenience stores and up to 70 Argos stores.
But it also plans to open 10 new supermarkets, 110 new convenience stores and 80 Argos outlets in its supermarkets. Sainsbury’s bought Argos in 2016.
The shakeup led to a £203m write-down of the value of its property portfolio in its half-year results, which wiped out most of its pre-tax profits.
With the write-down included, its profits were down to just £9m in the six months to 21 September, down from £279m last year.
Coupe said: “We have created positive momentum across the business through strategic investments in our customer offer.
“We have lowered prices on every day food and groceries, launched a range of value brands and are more competitive on price than we have ever been.
“We are investing in hundreds of Sainsbury's and Argos stores, introducing new products and services and continually improving service and availability. As a result, customer satisfaction has increased significantly year on year.
He added: “I would suggest that the whole Brexit scenario hangs over customers and creates uncertainty, so the quicker we can resolve that situation, the [sooner] economic factors should rebalance themselves.
He also said election day tended to be a “dull day for trade, and the closer we get to Christmas the higher sales are”.