Sainsbury’s to Cut Costs and Close Stores After Asda Deal’s Demise

(Bloomberg) -- J Sainsbury Plc pledged to reduce costs and close stores as Chief Executive Officer Mike Coupe seeks to move on from a failed bid to take over rival grocer Asda.

The U.K. supermarket operator plans to reduce expenditures by around 500 million pounds ($623 million) over the next five years as it integrates dozens of Argos home-goods outlets, acquired in 2016, into Sainsbury’s stores.

The company also plans to close some supermarkets while opening more convenience stores. It said it will stop issuing mortgages, a business that’s grown tougher as the U.K. housing market suffers from Brexit.

The changes are the most sweeping since U.K. antitrust regulators blocked the company’s planned acquisition of Walmart Inc.’s Asda in April. Sainsbury’s had promised 1 billion pounds in price cuts and 10% reductions on a range of everyday items if the acquisition was successful.

What Bloomberg Intelligence Says:

“Sales momentum, together with retained full-year pretax-profit guidance and longer-term cost cutting and debt targets should reassure that management can improve profit.”

-- Charles Allen, BI retail analyst

Sainsbury’s New Cost Cuts to Stem Fears of Margin Squeeze: React

The shares rose as much as 3% in early London trading, but they’re down 17% this year.

The company, which is holding an investor briefing on Wednesday, reported a 0.6% increase in grocery sales for the second quarter. It expects first-half underlying profit before tax to decline by around 50 million pounds because of unseasonal weather and the impact of cost savings but still sees full-year results in line with consensus views.

To contact the reporter on this story: Ellen Milligan in London at emilligan11@bloomberg.net

To contact the editor responsible for this story: Eric Pfanner at epfanner1@bloomberg.net

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