Bonus for Sainsbury's staff despite profit fall

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The Independent Online

Nine out of 10 employees at J Sainsbury will share a £38m bonus pot despite a total collapse in profits at the supermarket chain.

Nine out of 10 employees at J Sainsbury will share a £38m bonus pot despite a total collapse in profits at the supermarket chain.

Sainsbury's is still paying bonuses to staff at the 90 per cent of its stores that managed to hit availability and customer service targets. It reduced its number of out-of-stock items by 75 per cent, it said. Some 135,000 staff will each receive an average of £200.

The group said yesterday it was on track to match its rivals' sales growth by the second half of its financial year, which is in line with its target of growing sales by £2.5bn over the next three years.

It reiterated that all its efforts would go towards improving product availability and lowering prices rather than shoring up profits, which slumped to £15m in the year to March against £610m the previous year.

The group warned that its operating margin, which almost halved to 2 per cent from 3.7 per cent, would not improve until the latter stages of its next financial year at the earliest, as it plans to reinvest any cost savings in its customer offer. It also said plans to revive Sainsbury's bank were behind target, after the bank's operating profit halved to £13m last year. The group plans to focus on more commission-based products.

Justin King, the chief executive, said: "There are good early signs we are on track but we are only a small number of months into a three-year turnaround so you shouldn't get too carried away." He highlighted how tough Sainsbury's task was by pointing out some competitors "are prepared to buy business and frankly they can afford to buy business". Tesco has recently run a "below cost" promotion on Australian wines, he said. Group profits were hit by the £510m charge the company took to cover its business transformation, which includes the write-downs it was forced to take after its £3bn attempts to modernise its supply chain ended in failure. Underlying sales, excluding petrol, fell by 0.4 per cent, while total sales climbed to £16.4bn from £15.5bn. Its total dividend per share halved to 7.8p in line with its warning last October.

The bonuses for Sainsbury's employees contrast pitifully against the average £4,000 windfall a Tesco shopfloor worker received for last year.

Philip Hampton, the chairman of Sainsbury's, said most of Mr King's bonus had been obliterated. However, he can look forward to a potential £5m payout in four years if he revives Sainsbury's.