Wednesday 25 September 2019 7:33 am

Sainsbury's plans local supermarket expansion as it quits mortgage market

Around 110 new Sainsbury’s Local stores will open up across the country, the supermarket announced today as it closed a swathe of stores and pulled out of the mortgage market.

Weeks after reports emerged of a major shake up at Sainsbury’s Bank, the store confirmed that it would immediately stop new mortgage sales. It is also pulling funding, promising no more capital injections into the bank from the wider business after a £35m payment this year.

It is also pulling funding, promising no more capital injections into the bank from the wider business after a £35m payment this year.

Read more: Sainsbury’s planning major changes to struggling bank arm

Along with many other supermarket banks, Sainsbury’s has faced challenges from new digital challengers. It made a £34m statutory loss last year.

The chain said it is looking to close around 30 to 40 local stores but open around 110, resulting in a large net gain.

But meanwhile larger supermarket stores are expected to suffer, with around 10 set to open, but up to 15 penned for closure, the company said this morning. It will also close between 60 and 70 Argos stores, while opening 80 more.

It is a push on local for the supermarket chain, less than two months after rival Tesco said it was scaling back its larger stores, losing 4,500 jobs.

“We are investing significantly in our supermarkets, driving consistent improvements to service and availability,” said chief executive Mike Coupe.

Sainsbury’s was weighed down by its general merchandise sector in the second quarter, it said this morning.

Sales in general merchandising fell two per cent, the company said. It was a negative in a set of results which otherwise saw retail sales swing back into growth from the first quarter.

Total retail sales, including and excluding fuel, grew 0.1 per cent, after having fallen in the first quarter.

Read more: Sainsbury’s outperforms big four rivals

Meanwhile, clothing grew 3.3 per cent and grocery jumped 0.6 per cent.

Underlying profit before tax is expected to fall by £50m this year due to cost savings, “unseasonal weather” and the effects of a strong period last year. But it is on track to deliver on expectations for the financial year.

Richard Hunter, at Interactive Investor said Sainsbury’s had to be careful as it reviews the business.

“In a notoriously competitive sector and as seen in the past on numerous occasions, rivals move on rapidly, which can leave a company in the midst of a transformation behind,” he said.

Shares ticked up 2.5 percent to 218.3p this morning.