Sains­bury’s boss is­sues Christ­mas warn­ing

Chief ex­ec­u­tive makes new plea over Asda merger with dis­coun­ters mak­ing in­roads into fes­tive mar­ket

The Daily Telegraph - Business - - Front Page - By Ash­ley Arm­strong

THE boss of Sains­bury’s has made a fresh ap­peal to the com­pe­ti­tion watch­dog to ap­prove its £10bn merger with Asda as he warned dis­coun­ters’ in­cur­sions into up­mar­ket food ranges will make Christ­mas even tougher.

Mike Coupe, the chief ex­ec­u­tive, stressed Sains­bury’s was com­pet­ing with Aldi and Lidl on a wider range of prod­ucts than ever as “a fil­let steak has be­come al­most a com­mod­ity item”.

Tra­di­tion­ally, shop­pers trade up over Christ­mas to treat friends and fam­ily, but the fal­ter­ing con­sumer back­drop and bet­ter premium food ranges from dis­coun­ters could buck this trend. “Clearly we have to strike a note of cau­tion as this is an un­prece­dented time,” Mr Coupe said.

He ap­pealed to the Com­pe­ti­tion and Mar­kets Au­thor­ity, which is re­view­ing the merger plans, to ap­pre­ci­ate the pres­sure wielded by Aldi and Lidl.

The watch­dog has al­ready high­lighted 463 ar­eas in which com­pe­ti­tion would be less­ened by the Asda merger, which Mr Coupe dis­missed as a “fairly blunt” early anal­y­sis. The CMA will is­sue its pro­vi­sional find­ings in Jan­uary, which can be chal­lenged. Mr Coupe said: “Ul­ti­mately the CMA tests if there is con­sumer harm and we think that there is an over­rid­ing case this will ben­e­fit con­sumers as the syn­er­gies that will be passed on will mean lower prices for con­sumers”.

Sains­bury’s posted a 40pc drop in pre-tax prof­its to £132m in the six months to Sept 22 af­ter hefty one-off costs in­clud­ing £69m re­dun­dancy and re­struc­tur­ing costs, £25m from its in­te­gra­tion of Ar­gos stores and £17m in costs re­lated to the Asda merger.

The su­per­mar­ket’s to­tal sales rose 3.5pc to £16.8bn over the pe­riod, while like-for-like sales, which strip out the im­pact of new shops, was up 0.6pc.

Sains­bury’s ben­e­fited from the hot sum­mer that spurred sales at its con­ve­nience stores as shop­pers picked up burg­ers and beer dur­ing the World Cup. How­ever, staff cuts had dis­rupted sales as there were empty shelves.

It is still in­te­grat­ing its takeover of Ar­gos, open­ing a fur­ther 60 shops within super­mar­kets, tak­ing the to­tal to 251, which is help­ing to grow gen­eral mer­chan­dise sales by 1.5pc, ahead of the wider mar­ket. It has shut 122 high- street stores since its ac­qui­si­tion.

Julie Palmer, of Beg­bies Traynor, said: “The pur­chase of Ar­gos has been a well-crafted tac­ti­cal de­ci­sion to draw greater foot­fall into its stores and re­duce cost-sav­ing mea­sures. How­ever, there is still un­cer­tainty around its merger with Asda.”

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