Sainsbury's profits slump 29% as failed Asda merger attempt hits bottom line

Sales fell in Christmas while blocked deal with supermarket rival Asda costs £46m

Supermarket Sainsbury's profits slumped thanks to hefty charges including a £46m hit from its failed bid to merge with Asda.

Statutory profits plunged to £219m for the year to 9 March from £309m the previous year, weighed down by £396m of charges. Fourth quarter sales fell 0.9 per cent including a 1.1 per cent drop over Christmas. Stripping out one-off costs, pre-tax profit rose 7.8 per cent to £635m.

The competition watchdog last week blocked Sainsbury's £12bn bid to merge with rival Asda, citing concerns that it could raise prices for shoppers.

Sainsbury's chief executive Mike Coupe has been criticised for pushing the failed deal but said he planned to stay in the top job and would ramp up investment amid “competitive” conditions.

“I’m sticking to the company. I’m very proud of the organisation I run,” said Mr Coupe on BBC Radio 4's Today Programme.

He added: “The board is fully supportive of the leadership team and there isn’t a single major investor that wasn’t supportive of the deal but also recognised there were risks involved.”

Sainsbury's plans to pump an extra £100m into overhauling 400 of its supermarkets and will roll out digital services including payment via app.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: "The market's been worried about Sainsbury's ever since the tie-up with Asda fell through, and while underlying performance hasn't been stellar, the supermarket's beaten expectations, and that's provided the share price with a much-needed fillip.

"However, it's a bit premature to pop any champagne corks just yet."

Last week the Competition and Markets Authority (CMA) blocked the proposed tie-up between Sainsbury's and Asda which it said would lead to increased prices in stores, online and at petrol stations.

The watchdog said shoppers and motorists would be “worse off” if Sainsbury’s and Walmart-owned Asda were to merge, adding that the move would lead to reductions in the quality and range of products or a poorer overall retail experience.

The CMA claimed that the deal would have resulted in a “substantial lessening of competition” at both a national and local level for people shopping in supermarkets.