Sainsbury turns in £809m profit

Sainsbury re-asserted its position as the UK's most profitable grocery retailer yesterday, though it is still lagging behind arch rival Tesco in the battle for share of the UK's fiercely competitive grocery market.

Sainsbury yesterday disclosed pre-tax profits for the year of £809.2m, comfortably exceeding the £595m announced last month by Tesco.

Chairman David Sainsbury said that group sales growth to £12bn gave Sainsbury a share of 11.7 per cent, according to figures compiled by the Central Statistical Office, compared to 11.4 per cent enjoyed by Tesco. However, figures compiled by research group AGB show Sainsbury lying second behind Tesco.

Over the year, Sainsbury saw like-for-like sales increase by 1.1 per cent, only half that achieved by Tesco. Since the year end, Sainsbury has increased sales by just 2.3 per cent while Tesco, buoyed by the success of its loyalty card, has seen sales rise by seven per cent.

David Sainsbury admitted the launch of Tesco's Club Card had an effect on Sainsbury's sales, but said the impact was only around one per cent.

He also shrugged off the importance of the market share squabble. "The question is having profitable market share," he said. He said much of Tesco's success had been achieved by heavy advertising and launching the card, which would prove expensive to administer.

Mr Sainsbury also declined to commit himself to the UK launch of a Sainsbury loyalty card. Sainsbury has its Saver Card in 55 stores but only uses it "tactically" in new stores or those where competition is intense. The cards run for a few months.

Sainsbury said yesterday it plans to open only 12 new superstores this year, compared to 20 last year. More attention will be paid to refurbishments and extensions. Sainsbury says it will continue to focus on out-of-town developments rather than copy the Tesco Metro format of smaller, city- centre stores.

Sainsbury is continuing to expand its own brand products. Performers nappies and First Menu baby foods were launched during the year.

At Texas Homecare, the DIY chain acquired from Ladbrokes earlier this year, accountants are haggling over the final amount for the chain, expected to fetch £290m. Sainsbury says a decision on store closures next week would affect fewer than first thought.

Investment column, page 34