Sainsbury's in profit as cafes close

Profits at Sainsbury’s roared back into the black after a year of losses, as the supermarket enjoyed the benefits of the pandemic that saw much of the high street shut for long periods.

Bosses revealed pre-tax profits for the 12 months to March 5 hit £854 million, compared with a £164 million pre-tax loss a year earlier.

This was also a three-fold increase on pre-pandemic profits of £278 million.

However the supermarket warned that profits would be dented in the coming year as it reduces prices to help customers with the cost-of-living crisis.

And it has taken steps to save on costs, controversially closing most of its in-store cafes and removing specialist food counters.

The supermarket chain had around a dozen cafes across the West Midlands. They all shut last week, apart from the cafe in the Cannock store on the orbital Retail Centre, and at Whitchurch’s London Road site in Shropshire.

Staff in the cafes reported customers coming in to buy up packets of teacakes in bulk. The cakes were only available in the cafe and were a best seller.

Some of the cafes will be replaced with mini food courts, with High Street brands invited to take up space.

It comes after a successful trial run at the Birmingham Selly Oak store, where there are five established brands – Harry Ramsden’s fish and chips, Gourmet Burger Kitchen, Slim Chickens, Ed’s Easy Diner and Caffe Carluccio’s.

The supermarket business said it will also open 30 Starbucks sites across its stores, as it seeks to overhaul its offer across 250 stores over the next three years.

Sainsbury’s says it is also launching consultations with an undisclosed number of staff regarding plans to close less popular hot food counters in 34 stores and changes to how it runs bakeries in 54 stores.

Workers affected by the changes have been placed into different roles within the stores.

Sainsbury’s says shareholders would enjoy a dividend bonanza, with payouts of 13.1p per share – a jump of 24 per cent on a year ago.

The company’s preferred profit measurement – underlying pre-tax profits, which strip out one-off costs – hit £730 million.

However, the grocer warned this would be between £630 million and £690 million for the coming year.

Sainsbury’s had a particularly strong time in its grocery division, with sales up 7.6 per cent versus pre-pandemic levels - although these were flat on the previous year.

General merchandise sales were down 4.6 per cent versus pre-pandemic levels as supply chain issues hit and fell even further in the past 12 months - dropping 11.9 per cent.

Overall revenues were £29.9 billion - up 2.9 per cent compared with a year earlier.

Chief executive Simon Roberts said: “We know just how much everyone is feeling the impact of inflation, which is why we are so determined to keep delivering the best value for customers.

“We have been able to drive more investment into lowering food prices funded by our comprehensive cost savings plans.

“As a result, we continue to inflate behind competitors on the products customers buy most often.

“Last week we announced the next bold phase of investment, lowering prices across 150 of our highest volume fresh products.”

He also pointed out that Sainsbury’s had spent £100 million on pay rises for staff, bringing their salaries up to the Real Living Wage.

The Sainsbury’s results come as Tesco announced it will stop distributing paper Clubcard statements and vouchers under a shake-up of its loyalty scheme aimed to cut costs.

The changes, coming into effect from May, will affect select online shoppers who will receive an email informing them of the changes, Tesco said.

Any accumulated points will be transferred into vouchers over email, which will include a barcode that customers can scan at the checkout in stores.

However, users can specifically request to receive quarterly physical coupons, but have to do so by 5 May.