400 jobs at risk as Sainsbury’s ends Netto venture
AROUND 400 jobs are at risk following Sainsbury’s decision to shut its Netto stores, many of which are located in the North, after abandoning a joint venture with a Danish retailer.
Sixteen stores will continue to trade throughout July and will close during August, the supermarket chain said.
It is understood that staff will be re-deployed where possible.
Sainsbury’s and its partner in the venture, Dansk Supermarked Group, said the trial was ended because Netto needed “rapid expansion and investment.”
Dansk Supermarked Group and Sainsbury’s launched their Netto UK joint venture in June 2014. The first store was opened in Moor Allerton, Leeds in November 2014.
There are 16 trial stores now trading in the North of England in Lincoln, Sheffield, Doncaster, Lymm, Hull, Ellesmere Port, Southport, Leeds, Cleckheaton, Manchester, Salford, Ormskirk and Brookfield.
Following the initial period of trial store openings, DSG and Sainsbury’s made their decision to end the venture after “assessing trading data, customer and operational insights, expansion costs, the evolving food retail market and long-term strategies for each business.”
Mike Coupe, chief executive of Sainsbury’s, said: “Netto is an excellent retailer with talented leaders and colleagues and we have learnt a great deal about the discount grocery retail market from this trial venture. Since we first envisaged the trial, almost three years ago, the grocery sector has evolved significantly and we launched our strategy 18 months ago to address these changing dynamics.
“Against this backdrop, as planned, we carried out a detailed review with DSG on the future of Netto. To be successful over the long-term, Netto would need to grow at pace and scale, requiring significant investment and the rapid expansion of the store estate in a challenging property market. Consequently, we have made the difficult decision not to pursue the opportunity further and instead focus on our core business and on the opportunities we will have following our proposed acquisition of Home Retail Group. Our learnings from the trial will undoubtedly benefit the rest of our business as we move forward.”
Per Bank, CEO of Dansk Supermarked Group, said: “We, together with Sainsbury’s, set out to trial Netto in the UK to provide us with the basis to review the business at the end of the trial period. Whilst we are pleased with the performance of the stores to date, it has become clear to both partners that the business requires greater scale over a short period of time to achieve long-term success. Reaching scale has been challenging due to appropriate site availability and therefore we decided together to end the joint venture and focus on other opportunities within our respective businesses.
“We have thoroughly enjoyed the collaboration with Sainsbury’s and will now apply key learnings and insights within our business to deliver added value for our customers and owners.”
The current carrying value of the investment in the Netto JV within Sainsbury’s consolidated group accounts is £20m which will be written down to zero. Sainsbury’s is also expecting cash costs of around £10m to wind down the business.
