Sainsbury’s cuts 3,000 jobs as grocers seek cost savings

(Bloomberg) — J Sainsbury Plc, Britain’s second-largest supermarket chain, will cut 3,000 jobs and close remaining cafes after the government announced a rise in corporate taxes.

Sainsbury’s said on Thursday the move would involve a reorganization of roles at its headquarters and a 20% cut in senior management positions. Overall, the layoffs will affect about 2% of the grocer’s 148,000 employees.

The company’s shares fell 0.7% in London and have fallen 8% in the past 12 months as of Wednesday’s close.

Sainsbury’s said the cuts were part of a plan to save 1 billion pounds ($1.2 billion) in costs announced a year ago to help it compete with discount rivals including Aldi and Lidl. But the pace of announcements has accelerated since Labour’s revenue-boosting budget in October, which has imposed huge costs on businesses, including higher payroll taxes and the minimum wage.

Sainsbury’s said this month it would split staff pay increases in half for the first time to spread costs.

The job losses at grocery stores are further evidence of the budget’s impact on Britain’s retailers, the UK’s largest private sector employers. Warnings from ministers about the dire state of Britain’s public finances also weighed on consumer confidence.

Clive Black, head of consumer research at Shore Capital, said the job cuts were necessary for Sainsbury’s to remain competitive “especially with the significant cost expansion initiated by the UK government”.

Nearly half of respondents to the latest British Retail Consortium survey said they expected the economy to get worse over the next three months. United Foods cut sales growth guidance for its Primark discount fashion retailer on Thursday, citing sluggish spending.

Sainsbury’s said it would try to redeploy affected staff and the closure of the remaining 61 cafes would require consultation. The supermarket said it would also close its remaining pastry shop, hot foot shop and pizza counter, replacing them with popular aisle items including fresh food.

It comes as rivals shrink more costly store space. Tesco announced plans to close all food counters and delis in early 2023, saying shoppers preferred to buy packaged products from the aisles.

(Stock updates in third paragraph, analyst comments in seventh paragraph.)

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