Sainsbury’s boss defends growth plan as sales rise

Kasmira Jefford
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SAINSBURY’S chief executive Justin King said the supermarket chain shouldn’t be “apologising for investing in the UK economy” as he defended the group’s decision to open more than 1.4m square feet of new store space this year.

The UK’s third biggest supermarket has been driving an ambitious expansion strategy and spent £682m in the first half of its financial year opening 590,000 square feet of new space. Overall, the group plans to spend £1.2bn in the full year.

King’s comments came as the group reported profits before tax for the six months to October of £395m, down from £466m last year, reflecting lower profits from property disposals.

Underlying pre-tax profits increased by seven per cent from £332m to £354m, driven by £50m cost savings, on sales that rose by 6.1 per cent to £11.69bn.

Sainsbury’s aggressive expansion plan in a uncertain economic environment has been criticised, with some brokers saying they “harbour concerns” about the sustainability of returns from a £1.2bn capital expenditure.

Dave McCarthy, an analyst at Evolution Securities said: “Sainsbury remains very vulnerable in this environment. It is paying dividend out of debt, has the weakest cash flow and the thinnest margin of the big four.”

King, however said the group was pleased with its sales and profit performance: “We expect the economic environment to remain challenging for the foreseeable future but we are confident of further good progress in the Christmas period ahead.”

Last month the group joined a big four price-matching battle to win over cash-strapped shoppers. King said 50 per cent of baskets were cheaper than its rivals.