Home Estate Planning Sainsbury’s refuses to rule out job cuts in £1bn ‘food first’ strategy

Sainsbury’s refuses to rule out job cuts in £1bn ‘food first’ strategy

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Sainsbury’s did not rule out job cuts as part of its strategy update which aims to save £1bn and ramp up the amount of food it sells in its supermarkets. 

This morning, the UK’s second biggest grocery chain said it would slash the amount of general merchandise and clothing it sells in its shops, describing it as a push to become “food first”. 

Currently only 15 per cent of its supermarkets offer the full food range, with the new plan to focus on 180 of these highest potential stores.

It will also look to reduce the amount of standalone Argos stores it operates and bring them within Sainsbury’s stores. 

Sainsbury’s said it would expect profit growth from the start of the plan, and would increase capital expenditure by between £800m-£850m each year for the next three years.

Other areas of investment include £70m into its electric vehicle charging network, and open around 75 new Sainsbury’s local convenience stores across the UK.

The supermarket giant also said it will pursue a”progressive dividend policy” from the beginning of the next financial year, and will start a share buyback of £200m, supported by free cash flow of “at least” £500m.

In recent months the firm has also trimmed down its board of directors from 10 to seven in efforts to make it a “super tight team”. 

However the firm told City A.M today it could not provide an update on how the strategy would impact job roles for its thousands of employees. 

A Sainsbury’s spokesperson said: “Looking after our people will always be a key priority for us – as demonstrated by our recent investment of £200m in providing an industry leading pay rise.” 

In its most recent report to markets in early January, Sainsbury’s said its performance over the festive period saw third quarter food sales grow 9.3 per cent while Christmas grocery sales jumped up 8.6 per cent. 

Shares in the firm fell by over four per cent this morning. 

Russ Mould, investment director at AJ Bell said Sainsbury’s “unveiled bold plans to make the company bigger in the future. 

“To Sainsbury’s credit, its performance has been good in recent years and there is finally an energy about the business which has been absent for decades.”

He added: However, its growth plan is not something that is guaranteed to work its magic. It’s not hard to dream up such a wish list to improve the company’s fortunes as it is basic business sense.”

“Achieving the goal is another matter and it will cost money – something the market typically hates. Sainsbury’s shares fell on the news, but interestingly so did Tesco and Marks & Spencer as they face new competitive threats.”

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