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Sainsbury's unveils plan post-Walmart's Asda merger collapse and amid Brexit

Lianna Brinded
Head of Yahoo Finance UK
In this arranged photo illustration, a Sainsbury’s shopping bag is seen on the ground in the car park of an Asda supermarket on April 29, 2018 in London, England.Photo: Chris J Ratcliffe/Getty Images

Sainsbury’s (SBRY.L), one of Britain’s largest grocery stories, has unveiled its plans for the future for the first time since a regulator blocked its proposed mega-merger with rival Asda.

The group said in its preliminary results statement for 2018/2019 that it would accelerate investment in its store estate and technology, including rolling out SmartShop self-scan to over 100 supermarkets and trialling the UK’s first checkout-free grocery store.

It comes after the Competition and Markets Authority (CMA) blocked its planned tie-up with Asda, which is owned by the US’s Walmart (WMT), earlier this month.

The deal would have created the UK’s biggest supermarket chain, overtaking Tesco (TSCO.L), but the CMA said it should not go ahead as prices would rise and it would reduce choice and quality of products.

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Sainsbury’s also warned on Wednesday of Brexit uncertainty affecting its results. It said “economic conditions eased slightly for UK consumers over the last 12 months, as average weekly earnings grew ahead of a reducing inflation burden for most of the year. Despite this, consumer confidence was impacted by the continuing uncertainty around Brexit.”

“Lower levels of inflation and declining consumer confidence have resulted in reduced sales growth in both the food and non-food sectors. Non-food retailers were particularly impacted by weak demand, rising costs and the ongoing impact of increasing online penetration, driving further consolidation and restructuring of the sector,” it added.

Sainsbury’s reported a second straight quarter of underlying sales decline. Like-for-like sales in its fourth quarter to March 9 showed a 0.9% drop and a 1.1% fall over the Christmas period.

Sainsbury’s said on Wednesday its fourth quarter to March 9 like-for-like sales fell 0.9 percent, having fallen 1.1 percent over the Christmas period. Underlying pretax profit for the grocer’s full 2018-19 year rose 7.8% £635m — mainly because of the Argos general merchandise business it bought in 2016.

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