Sainsbury's defends move to axe 3,500 jobs

FTSE 100 grocer plans to shut 420 standalone Argos branches over the next three and a half years

Sainsbury's is to hand a £231m dividend pay-out to investors, despite axing 3,500 jobs and vowing to close 420 Argos stores as part of a huge restructuring drive. 

The FTSE 100 grocer will not reopen 120 Argos outlets that have been closed since March and is seeking to shift the brand inside Sainsbury's stores instead.

It expects to shut 420 standalone Argos branches over the next three and a half years, leaving it with just 100 sites, while launching more Argos stores and collection points at supermarkets.

Sainsbury's will also close its meat, fish and deli counters to make stores simpler and reduce food waste.

The dividend payment is particularly controversial because Sainsbury's was given a business rates holiday worth £230m as part of Government efforts to help retailers survive Covid.

Critics claim the tax break should not have been offered because grocers were allowed to stay open at the height of the pandemic, and enjoyed a major sales boost due to panic buying.

Boss Simon Roberts insisted the dividend is justified because retail investors depend on the stock for an income.

He said: "The interim dividend is because the business has delivered in the first half and we should remember that millions of our shareholders are individual, small investors or pensioners who rely on dividend income.

"Business rates is a separate issue. We have worked really hard to feed the nation and that has caused costs. I feel strongly about this issue because it’s hard, while we have had business rates support, the cost of doing business has been ahead of that and it’s an unfair system."

 Mr Roberts noted that Sainsbury's had to cough up £290m to make stores safe, hire more staff and pay employees who have been forced to self-isolate since coronavirus hit.

The decision to cut jobs was tough but inevitable, he added.

He said: "We have to face the reality here. However tough this news is for our people, customers are shopping very differently – less customers are shopping on the high street, and we have seen a big shift online. 

“We’re going to work really hard to be able to find alternative roles for as many of our colleagues as possible.”

It came as the grocer swung to a £137m pre-tax loss in the the six months to Sept 19 after suffering a £438m one-off hit associated with the Argos store closures.

Total sales fell 1.1pc to £14.93bn, partly because sales of fuel were lower at its petrol stations. Grocery sales jumped and the retailer revealed that 40pc of all sales now take place online, up from 19pc a year ago. 

Sainsbury's is also seeking to cut prices, similar to rivals Tesco, Morrisons and Asda. The retailer reduced costs on 300 items in October alone. 

However, he rejected suggestions that Sainsbury's was becoming more like discounters Aldi and Lidl. 

Sainsbury's will also introduce more Habitat products in supermarkets. It bought the brand along with Argos in a £1.4bn deal four years ago. 

Supermarkets were a winner of the spring lockdown and are likely to benefit again as Britons stay at home and prepare for Christmas. 

Mr Roberts said: "As we go into lockdown in England for the second time this year and restrictions are in place across the UK, we know our customers and colleagues are feeling anxious and we will do all we can to support them."

He acknowledged that there is a risk shoppers will end up queuing outside supermarkets in the cold, saying he would support longer Sunday trading hours in the run-up to Christmas so customers can spaced out their visits.


Mr Roberts, who stepped up from operations director to chief executive in June, added that he will waive any bonus he is entitled to this year. 

The job losses come after John Lewis and Lloyds announced plans to axe more than 2,500 roles between them on Wednesday. 

Sainsbury's announced a special dividend of 7.3p per share after deferring its final shareholder payout in April. It will also pay an interim dividend of 3.2p. 

The retailer said it could not fully predict the impact of a second lockdown on retail sales and costs in the second half of the year, but based on current assumptions it expects underlying pre-tax profit to increase by at least 5pc in its current financial year. 

Analysts at Shore Capital said Mr Roberts "has grabbed the bull by the horns, developed a plan that at surface level appears credible and one that can sustain free cash flow, strengthen the group’s solvency and so sustain an income stream to investors".

Shares fell 4.5pc to 199.45p in afternoon trading.