Sainsbury’s profits slide as Argos covers the cracks

Sainsbury’s £1.4 billion takeover of Argos helped soften the blow of a sales fall at its core supermarkets business today.

Sainsbury’s, which bought Argos for £1.4 billion last year, said underlying pre-tax profit fell 1% to £581 million in the year to March 11.

Argos’s £77 million contribution and savings of £130 million offset rising costs, such as the increase in the national living wage, and efforts to keep prices low amid a fierce industry war.

Boss Mike Coupe said he was “very pleased” with the Argos deal and insisted the rest of the firm had been “resilient”, despite sales at Sainsbury’s stores open for more than a year dipping 0.6% while Argos sales rose 4.1%. Shares fell 4% to 268p.

“The market place this year has been one of the most interesting, challenging and volatile that I’ve ever experienced in my working lifetime. In the last five years we’ve done incredibly well, broadly speaking, to maintain market share.”

Sainsbury’s expects costs to rise between 2% and 3% in the next year amid pressure from sterling’s weakness. Analysts are forecasting another profit fall in 2018.

Data from research firm Kantar Worldpanel showed all supermarket sales rose 3.7%, their fastest since September 2013, in the past 12 weeks.