J Sainsbury plc (LON:SBRY) saw its acquisition of Argos boost full-year sales by over 12%, but sales at its core supermarket operations continued to decline, with the market outlook remaining uncertain and the group chopped back its dividend, sending its shares lower.
For the 52 weeks to 11 March 2017, Sainsbury’s group sales rose by 12.7% to £29.112bn, up from £25.829bn a year earlier, with like-for-like sales, excluding fuel, at the supermarkets business falling by 0.6%, against a 0.9% decline in the previous year, and Argos sales up 4.1%.
In early trading, Sainsbury’s shares were 1.8%, or 5.0p lower at 274.5p.
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In a note, Neil Wilson, senior market analyst at ETX Capital, said: “Not a great set of numbers from Sainsbury’s this morning but largely in line with expectations.
“While the core brand seems to be struggling and losing ground to rivals, recently-acquired Argos is delivering the top line growth that keeps the group above water.”
The FTSE 100-listed firm’s underlying pre-tax profit fell by 1% to £581mln, above forecasts for £578mln but down from £587mln a year earlier, with reported pre-tax profits down 8.2% to £503mln from £538mln, a third straight year of declines.
Sainsbury’s said the profit decline reflected price cuts and cost inflation, offset by £130mln in cost savings and a £77mln contribution from catalogue stores group Argos, acquired with the takeover of Home Retail Group.
On the outlook, the firm said: "The market remains competitive and the impact of cost price pressures remains uncertain.”
Sainsbury cut its final dividend by 18.5% to 6.6p, down from 8.1p, giving a total payout of 10.2p, down 15.7% on last year’s 12.1p.
“Food business remains resilient in a challenging market,” says boss
Mike Coupe, Sainsbury’s group chief executive, said: “Our food business remains resilient in a challenging market and we continue to innovate in quality and to invest in price.”
He added: “Sainsbury's design-led General Merchandise and Clothing both outperformed the market and we saw strong growth in Sainsbury's Groceries Online and Convenience channels.”
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The group opened 59 Argos Digital stores in Sainsbury's supermarkets over the period and said they were performing well.
The firm said it is accelerating its plan to open a total of 250 Argos Digital stores in Sainsbury's supermarkets and will deliver its £160mln underlying earnings (EBITDA) synergy target by March 2019, six months ahead of schedule.
Sainsbury’s also said it was on track to deliver its three-year, £500mln cost saving programme by the end of 2017/18, with a further £500mln cost savings target set over three years from 2018/19.
-- Adds share price, analyst comment --