Up to 3,500 jobs are expected to go at Sainsbury’s as the supermarket closes the bulk of its standalone Argos stores as well as all its meat, fish and deli counters.
The retailer, which employs 172,000 people, said about 420 of its Argos stores would close over the next three years, leaving just 101 standalone stores compared with 845 when Sainsbury’s paid £1.4bn for Argos in 2016.
Alongside the closures, Sainsbury’s said 150 Argos stores would be moved into its supermarkets as part of an effort to save more than £600m in costs over the next three years.
The changes come as Sainsbury’s, the UK’s second largest supermarket, said 40% of its sales were now online – compared with 19% a year ago – after the dramatic change in shopping habits during the pandemic.
Bev Clarkson, national officer for the food industry at the union Unite, which represents workers on Sainsbury’s fresh food counters, said: “This is very grim news for our members and their families in the run-up to Christmas, and we will be giving them maximum support during this worrying and uncertain time.”
The company is aiming to find new roles for thousands of staff affected by the changes, but expects 3,500 could leave despite plans to increase the overall number of people it employs by 6,000 by March. Most of the new roles are linked to expanding the group’s online services.
Sainsbury’s plans to increase its grocery home delivery capacity from just over 700,000 slots a week to 760,000 by the end of the year. The move follows a doubling of online sales in the half year to 19 September as more customers chose to avoid physical stores during the pandemic.
Simon Roberts, the chief executive of Sainsbury’s, said: “Covid-19 has accelerated a number of shifts in our industry. Investments over recent years in digital and technology have laid the foundations for us to flex and adapt quickly as customers needed to shop differently.”
He added that customers were unlikely to go back to the way they shopped before the pandemic.
As supermarkets shape up for a tricky Christmas because of the financial difficulties facing many families, Sainsbury’s has lowered prices on 1,500 grocery products and pledged more price cuts on essential items in the coming months.
Roberts said the retailer was not moving downmarket by closing its fresh food counters and cutting prices, but was making “a direct response to what customers want”.
With more people choosing to pick up their groceries closer to home, Sainsbury’s said it would open up to 20 more convenience shops this year, including larger “neighbourhood hubs” with clothing and Argos pickup points. However, up to 20 large supermarkets and 60 convenience stores, which are now considered to be in the wrong location, such as city centres, could close over the next three years.
The cost-cutting plan comes after Sainsbury’s reported a pre-tax loss of £137m in the six months to 19 September, down from a £9m profit in the same period last year, as total sales decreased by 1.4%. Trading was hit by a fall in petrol and clothing sales, which offset an 8.2% increase in sales of groceries and 7.4% rise in general merchandise led by Argos.
However, the company said pretax profits for the full year would be up by at least 5% after a stronger-than-expected performance at Argos during lockdown.
Sainsbury’s said it would pay out £232m in dividends – almost the same amount as it claimed in business rates relief from the government. The dividend decision – which the supermarket delayed by several months – comes despite similar payouts by Tesco and Morrisons drawing heavy criticism.
Roberts said that £160m of the paout related to the previous financial year, before the business rates payments were claimed, and the payment relating to the first half of this year was important as “many small shareholders rely on the dividend”. He added that Sainsbury’s had incurred heavy costs in continuing to “feed the nation” and had not called on furlough payments or other government support measures during the year.
Sainsbury’s said it had spent £290m on Covid-related protective measures for staff and customers in the half-year period on top of oneoff costs of £438m related to the closure of Argos stores and other restructuring. Roberts said Sainsbury’s expected to spend more than £460m on extra staff costs and protective wear related to the pandemic for the full year.
Shares fell more than 5% to 198p.
