Sainsbury’s set to accelerate investment after blocked Asda merger

Sainsbury’s set to accelerate investment after blocked Asda merger

Sainsbury's profits take a hit

Sainsbury’s (LON:SBRY) announced on Wednesday that it will be accelerating investment in its in store estate and technology as it attempts to reduce its net debt.

The supermarket said that it will invest to improve over 400 supermarkets this year, in addition to reducing its net debt by at least £600 million over the course of the next three years.

The supermarket announced the move in its full-year results, following the block of its potential merge with Asda.

Last week, the Competitions and Markets Authority blocked Sainsbury’s £7.3 billion takeover of Walmart’s Asda (NYSE:WMT) because it would create a “poorer overall shopping experience”. The CMA found that the merger would lead to increased prices, despite the two supermarkets pledging to implement price cuts. It also said that the merger would lead to reductions in the quality and range of products on offer and a poorer shopping experience for consumers across Britain.

“We will increase and accelerate investment in the core business, investing to improve over 400 supermarkets this year. £4.7 billion of our revenue now comes from our online businesses and we are increasing investment in technology to make shopping across Sainsbury’s, Argos and Sainsbury’s Bank as quick and convenient as possible,” Mike Coupe, Chief Executive of Sainsbury’s, commented in the company’s results.

“We will also continue to strengthen our balance sheet and are making a new commitment to reduce net debt by at least £600 million over the next three years,” Mike Coup continued.

Sainsbury’s, the UK’s second largest supermarket chain, posted an underlying profit before tax of £635 million. The figure is a 7.8% increase and is driven by solid food performance, delivery of £160 million Argos synergies nine months ahead of schedule and reduced interest costs.

The supermarket also said that its was trailing the UK’s first checkout-free grocery store, as well as rolling out SmartShop self-scan in over 100 supermarkets.

Argos sales grew, outperforming a highly competitive and “very promotional” market.

In its outlook, it warned of the uncertainty surrounding the market. “Retail markets are highly competitive and very promotional and the consumer outlook continues to be uncertain,” Sainsbury’s said. Despite this uncertainty, it said that it remains well placed to deliver its strategy and cope with the external environment.