Sainsbury’s share price up 4% as CEO comes under pressure after blocked Asda merger

The UK’s second largest supermarket by market share saw its share price climb higher on Wednesday despite recording a slide in annual sales, while its CEO comes under pressure to find growth after regulators block Asda merger.

Sainsbury's and Asda Source: Bloomberg

Sainsbury's CEO Mike Coupe is under increased pressure to drive growth after the supermarket recorded a 41% decline in pre-tax profit to £239 million in its annual results on Wednesday.

However, the supermarket’s share price climbed more than 4% on Wednesday morning, with it able to record a 7.8% increase in underlying profit, driven by £220 million in cost savings amid tough market conditions.

The company also suffered another major setback last week when the UK Competition and Markets Authority (CMA) opted to block its planned merger with Walmart-owned Asda.

Sainsbury’s CEO was quick to reassure shareholders that the business will continue to see growth despite the failed merger, with the supermarket set to increase and accelerate investment in its core business across more than 400 stores.

‘£4.7 billion of our revenue now comes from our online businesses and we are increasing investment in technology to make shopping across Sainsbury’s, Argos and Sainsbury’s Bank as quick and convenient as possible,’ Coupe said. ‘We will also continue to strengthen our balance sheet and are making a new commitment to reduce net debt by at least £600 million over the next three years.’

Sainsbury’s results: key figures

Despite suffering a significant decline in pre-tax profit, Sainsbury’s revenue edged higher, hitting £29 billion, up from £28.5 billion last year.

Underlying earnings per share at the supermarket increased by 7.8% to 22p a share, allowing it to pay a final dividend of 7.9p a share, bringing its full-year pay-out to shareholders to 11p a share.

Meanwhile, net debt fell by £222 million to £1.6 billion, with the company’s retail free cash flow at £461 million, representing an increase of 6.7% over the year.

Blocked Asda merger costs Sainsbury’s £46 million

The failed Asda merger is a major blow to both supermarkets, but adding insult to injury, the blocked deal cost Sainsbury’s £46 million.

The news leaves the supermarket forced to come up with a new strategy to drive growth in what is a highly competitive market.

Shareholders were left disappointed by the lack of a plan B Sainsbury’s annual results, with its CEO facing pressure from investors to plot a new course to find growth in 2019.

Coupe told the BBC's Today programme: ‘Well, we draw a line under the past... The authorities blocked the [Asda] deal, but we think our business is adapting to the changing world of retail, and we will carry on investing in our business.’


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

European Central Bank meeting

Learn about how the ECB meeting affects interest rates and price stability ahead of the next announcement on 25 July 2019.

  • How might the next meeting affect the markets?
  • What are the key rate decisions to watch?
  • Why is the Governing Council announcement important for traders?

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Change
Sell
Buy
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

All trading involves risk and losses can exceed deposits. Trading CFDs may not be suitable for everyone so please ensure that you fully understand the risks involved. All trading involves risk and losses can exceed deposits.