Sainsbury's has posted its first loss in 10 years and cut the dividend by almost a quarter, but is pinning its growth hopes on clothing, convenience stores, and its bank which employs 320 in Edinburgh.
The £72million loss came after the retailer wrote down £628m on its land pipeline and unprofitable stores, while its property portfolio has crashed by £900m during the year. Its core operating profit from retailing was down 17per cent at £720m.
The final dividend of 8.2p, down by a third, makes a full-year payout of 13.2p, down 24per cent from last year's 17.3p, demonstrating the effect on shareholders of the retailing wars which saw Tesco post a £6.4bn loss last month.
The shares fell 11.1p to 263.9p, down 4 per cent yesterday and 20per cent over 12 months.
Market share figures published yesterday by Kantar however show Sainsbury's held up better than its rivals in the last quarter, its share slipping one point to 16.5per cent, while both Tesco at 28.4per cent and Asda at 16.9per cent both lost four points. Aldi jumped from 4.7per cent to 5.4per cent, overtaking a static Waitrose at 5.1per cent, while Lidl rose from 3.5per cent to 3.8per cent.
New chief executive Mike Coupe said: "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."
Sainsbury's reported a 0.9per cent fall in underlying sales, declining to 1.9per cent when new stores are stripped out, but there were sales rises of 7per cent in general merchandise and 12per cent in clothing, where its Tu brand with new collections every six weeks is now the seventh biggest fashion retailer.
Convenience stores posted a 16per cent rise to £2.1bn, out of the total sales of £26bn, as it opened 98 new stores to top the 700 mark. The best performance came at the bank with a 17per cent rise in operating profit to £62m. During the year it announced plans to expand the bank by up to 25per cent, and its results show total income up over 13 per cent to £260m. That included sales growth of 50per cent in credit cards, 24per cent in travel money and 13per cent in personal loans, as well as 64per cent in pet insurance and 12per cent in website traffic. The net interest margin rose from 3.1per cent to 3.9per cent (it is 2.65per cent at Lloyds).
The group said: "We see significant growth opportunities for Sainsbury's Bank, in particular capitalising on the brand loyalty effect we see from our customers. Last year we saw a 13 per cent increase in the number of Sainsbury's Bank credit cards being used within our stores. Whilst reduced advertising activity has resulted in overall customer awareness of the bank declining slightly during the year, the number of active accounts held by customers has now reached 1.7 million, an increase of six per cent."
The profit was however offset in the group's accounts by a £53m transition charge in its first full year of ownership of the bank after buying out Bank of Scotland's 50per cent stake in January last year. The group said although transition plans remained on time and in line with budget, total costs for the project would rise by between £80m and £120m, taking overall spend to up to £380m.
Sainsbury's, which has 82 stores in Scotland, said traditional grocers needed to adapt their business model to "changing shopping missions", adding: "Customers are leading increasingly busy lives and, with early signs of improvements to disposable income levels, there is still an opportunity to serve all of a customer's needs under one roof, or through one brand. Generating customer loyalty will be critical in this respect."
It said around a quarter of its stores would have "some under-utilised space" over the next five years - around six per cent of its total space. Half of this would be used to expand clothing and general wares, the other half for "carefully selected concession partners" such as Argos, Timpsons, and GP and dental surgeries.
Keith Bowman, equities analyst at Hargeaves Lansdown, said: "Despite beating adjusted profit forecasts, this is a financial year management will want to forget. Intense competition, led by the discounters, lies at the heart of the group's challenges, with key financial metrics including the dividend payment all moving lower."
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