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Dozens of Sainsbury's and Argos stores to close down

Tom Belger
·Finance and policy reporter
General view of the entrance to a Sainsbury's supermarket, incorporating a Lloyds Pharmacy and an Argos store, in Whitley Bay, North Tyneside.
Sainsbury's and Argos are closing stores. Photo: PA

Dozens of Sainsbury’s (SBRY.L) and Argos stores are to close as part of a £500m cost-cutting drive over the next five years.

Up to 15 Sainsbury’s supermarkets, up to 40 convenience stores and up to 70 Argos stores will be shut down under the plans.

But Sainsbury’s, which bought Argos in 2016, said it also planned to open around 10 new supermarkets, 80 Argos outlets in Sainsbury’s and 110 new convenience stores.

The company did not say in its latest trading update on Wednesday what the shakeup could mean for staff numbers, or which stores will be affected.

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Mike Coupe, CEO of Sainsbury’s, said: "Sales momentum was stronger in all areas and we further improved our performance relative to our competitors, particularly in grocery.

“We have focused on reducing prices on every day food and grocery products and expanding our range of value brands, which have been very popular with customers. At the same time, we are investing significantly in our supermarkets, driving consistent improvements to service and availability.”

The group raised its target for debt reduction to at least £750m over three years, with plans to lower it by at least £300m in the 2019-20 financial year alone.

Mike Coupe, CEO of Sainsbury's poses in a store in Redhill, Britain, March 27, 2018. REUTERS/Peter Nicholls
Mike Coupe, CEO of Sainsbury's. Photo: REUTERS/Peter Nicholls

It also highlighted the pressure of rising prices as it looks to cut down on costs.

The store closures will save around £20m a year, but the cost of shutting down branches will be up to £270m, according to Sainsbury’s second-quarter update.

Like-for-like sales excluding fuel dropped 0.2% in the 12 weeks to 21 September, an improvement on the 1.6% drop in the first quarter.

“Confusingly, Sainsbury say that [first-half] profits will be down by as much as £50m, for various reasons, but it trumpets ‘improved sales momentum across all areas of the business’ and flags that full-year profits are still on track to meet City expectations,” said retailing analyst Nick Bubb.

Neil Wilson, chief market analyst at Markets,com, noted there was “no word” on the future of Sainsbury’s chief executive amid claims a search had begun for his successor, adding: “Maybe he’s sticking around for longer.”

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The latest figures from market research firm Kantar earlier this month on UK supermarket sales showed a decline in sales at the biggest four supermarkets over the past year.

Tesco (TSCO.L), Sainsbury’s, Asda and Morrisons (MRW.L) were all in negative territory over the past year.

But Kantar said Sainsbury’s suffered the smallest hit, with sales down 0.1% to a reported £4.1bn, while Morrisons was hit hardest with sales down 2% to £2.7bn.

Meanwhile online grocery chain Ocado (OCDO.L) saw the fastest rise in sales.

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