Sainsbury (J)

Sainsbury’s chief executive Simon Roberts said households are under pressure and food producers face rising costs, calling on the government not to ‘further aggravate’ business cost burdens in the upcoming budget. The group reported slower sales growth of 2.6% in the six months to 12 September (1.9% in Q2), with online groceries up 9% and proprietary premium range sales rising 6%. Pre-tax losses widened to £63m while underlying profit (excluding Argos) rose 5.2% to £366m, and Sainsbury’s now expects annual underlying profit of at least £1.02bn; the retailer plans to open 10 supermarkets and 25 convenience stores and is progressing the Argos disposal. » More on theguardian.com

Sainsbury’s held merger talks with Morrisons and is seen as the most likely buyer to drive consolidation in the UK grocery market, potentially targeting either Morrisons or Asda. A provisional CMA view that Aldi and Lidl now qualify as full grocery retailers reduces some competition hurdles and may lower the number of store disposals required for approval. Analysts say scale and cost savings are the main drivers for any deal, while heavy debts at Morrisons and Asda’s struggles make both vulnerable, though regulatory risk and execution costs remain significant. » More on theguardian.com

Sainsbury’s and Morrisons held multibillion-pound merger talks but Sainsbury’s pulled back, judging the tie-up not a must-do despite likely regulatory approval risks. The CMA would probably approve some form of deal but require site-by-site remedies, which could complicate value for Sainsbury’s. Morrisons’ private equity owners seek an exit, making a sale to Sainsbury’s plausible, yet Sainsbury’s can afford to wait or demand better terms. » More on theguardian.com