Supermarket giant in £92m property write-off

A supermarket heavyweight has been forced to strip £92 million from the value of its property portfolio.

Sainsbury’s incurred the jumbo loss by throwing away plans for its 15 new supermarket stores from around 70-80 schemes.

Despite the fact that the chain announced better than expected profits, it claims the plans were no longer economically viable to develop.

John Rogers, Sainsbury’s Finance Director, insisted that there would be no more write downs to the company’s estate. He said: “It is not part of a programme... It’s a one-off event that we do not anticipate repeating.”

John Rogers said that the 15 sites for the new supermarkets were mostly land redevelopments that were close to town centre. However, changes in planning regulations meant that it would be easier to open new branches outside of town.

Despite the setback, Sainsbury’s portfolio is rising from £300 million to £11.8 billion. It announced it had allocated £13 million for a “commercial item, for which we intend to defend our position”.

In the six months to September-end, Sainsbury’s pre-tax profits increased by 7 per cent to £400 million. The 4.4 per cent rise in total sales to nearly £14 billion was put to cost cuts of £55 million and while reflecting on the profits Justin King, the mass chain’s Chief Executive, said: “I am very happy at Sainsbury’s and continue to see myself playing a part.”

Sainsbury’s recently reclaimed its title as the second biggest grocer 10 years after it fell behind Asda.

The supermarket still opens around 10 new large stores a year and two convenience branches a week.  Its convenience stores are more profitable than the large outlets.

The write down follows a £800 million charge from Tesco after it announced it was abandoning UK projects.

 

[Picture: ell brown]