Sainsbury’s became the latest supermarket to take the knife to its final dividend yesterday, joining banks and oil companies in what analysts called a “horror show of income slashers”.
Sainsbury’s said it will pay a full-year dividend of 13.2p per share, down 23.7 per cent on last year, after changing its policy in November to help boost its balance sheet and fund £150m price cuts in the face of the threat from discounters and its peers.
Profits at all the major grocers have been hit hard by competition from Aldi and Lidl, record food deflation and fewer visitors to their larger stores as shoppers increasingly move to convenience stores and online.
In January, Tesco said that it would scrap its dividend altogether to give it more firepower, while Morrisons is expected to cut its dividend by as much 63 per cent this year after suffering its worst annual results in eight years.
“In so many decades supermarkets were a dependable source of income – usually yielding anything between four and five per cent – and that has disappeared,” Shore Capital analyst Clive Black told City A.M.
“Supermarkets have joined the horror show of income slashers and it will be a long time before they are attractive to investors again.” he added.
Sainsbury’s posted a £72m loss in the year to 14 March – its first loss in a decade – after booking £753m of charges mainly related to write-downs on the value of its property.
Chief executive Mike Coupe said volumes were improving but warned “not to get carried away”, adding that he expected the market to be challenging for the next 12-18 months.
Alan Borrows, a senior fund manager at Seneca Investment Management, a Sainsbury’s shareholder, told City A.M.: “We are certainly being patient at the moment but the environment looks tough going forward. But we would take the view that the management is taking the right sort of measures.”
SAINSBURY’S FULL-YEAR RESULTS IN BRIEF
■ Sainsbury’s reported a statutory pre-tax loss of £72m in the year to 14 March after booking £753m of one-off charges, including £628m related to write-downs on the value of its property.
■ Underlying profit before tax fell by 14.7 per cent to £681m. This was ahead of analyst expectations for underlying profits of around £660m.
■ Sainsbury’s already reported sales fell 0.9 per cent to £26.1bn, while sales at stores open over a year, excluding fuel, fell 1.9 per cent.
■ Chief executive Mike Coupe said it was seeing the first shoots of a recovery, with volumes up six per cent on the 1,100 products on which Sainsbury’s has cut prices since its strategic review in November.
■ The group has committed to spending £150m on price cuts this year but didn’t rule out spending more, saying its has “the financial firepower” to do so.
■ Sainsbury’s shares, which are down around 17 per cent over the year, fell by 3.16 per cent to 266.3p last night.