Sainsbury’s to Cull Management Ranks After Failed Asda Takeover

(Bloomberg) --

J Sainsbury Plc plans to axe hundreds of management jobs as the U.K. supermarket operator cuts costs in the wake of a failed bid to buy rival grocer Asda.

The streamlining comes as Sainsbury plans to merge the commercial, retail, finance, digital, technology and human resource teams of the Sainsbury supermarket and Argos electricals chains, Chief Executive Officer Mike Coupe said in a letter to all employees Tuesday afternoon.

Coupe said the move will bring Sainsbury’s and Argos closer together more than three years after it bought the electronics chain for 1.4 billion pounds ($1.8 billion). It also comes about nine months after Sainsbury’s takeover of Asda, the U.K. grocer owned by Walmart Inc., was blocked by U.K. antitrust regulators, raising questions about the grocer’s ability to grow as a standalone business.

“While change can be hard, it’s also necessary,” Coupe said in the email. “Truly integrating our business also unlocks efficiencies that we can reinvest in the things that matter most to our customers.”

Sainsbury shares fell as much as 1.3%, and they’re down 22% over the past 12 months.

British grocers, including Tesco Plc, Wm Morrison Supermarkets Plc and Asda, have cut thousands of jobs during the past few years in a bid to become more efficient and face competition with German discounters Aldi and Lidl.

Last year, Sainsbury carried out a major shakeup of its stores, cutting shop-floor management jobs. Since last March, it has also shrunk its senior leadership team by more than 20%.

At an analyst presentation in September, Coupe said the group had a “unique opportunity” to structurally reduce costs by about 500 million pounds over five years through greater integration of the Argos chain.

Earlier this month, Sainsbury reported better-than-expected trading during Christmas, but it’s operating in a market hit by brutal price pressure and the shift to e-commerce.

To contact the reporter on this story: Deirdre Hipwell in London at dhipwell@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier

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