Sainsbury's culls office staff to pay for 3,000 shop workers

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The Independent Online

J Sainsbury, the troubled supermarket group, will tomorrow unveil plans to recruit up to 3,000 staff to improve its service to customers.

The announcement will come as Justin King, the recently installed chief executive, reveals the results of his six-month business review.

A cull of between 700 and 1,000 jobs at the group's head office in Holborn, central London,will help pay for the extra staff on the shop floor, a source close to the company said.

Mr King, who succeeded Sir Peter Davis six months ago, is expected to write off up to £500m of the £3bn the struggling retailer has spent on overhauling its distribution system over the past three years.

The new system, created by Sir Peter, has failed to improve the availability of stock. That has led to goods being dumped unsorted at the back of stores where they were being left to rot. Many of the new staff will be deployed to unpack these goods.

The distribution system was designed by Retek, a US software company, and then outsourced to the consultants Accenture. Insiders believe it could take at least a year to eliminate all of the problems with the system.

The expected write-down will push Sainsbury's into a full-year loss. Analysts have already slashed their forecasts after the company issued its third profits warning since March two weeks ago. Pre-tax interim profits, due tomorrow, are likely to be between £125m and £135m, while the most recent analysts' forecasts for final pre-tax profits range from £280m to about £340m.

Mr King will also announce the sale of the group's former head office in south London for about £30m and the closure of up to 15 stores in an effort to claw back costs.

The £300m dividend is also set to be halved, to 7p a share. Sainsbury's has already slashed the prices of hundreds of goods, taking a massive hit to its profits. It has warned that interim profits will fall by two-thirds.

Separately, it emerged that Philip Green has repaid all of the £808m that he borrowed two years ago from the HBOS bank to acquire Arcadia, the Topshop to Burton retail group.

The repayment of the six-year loan comes four years ahead of schedule.