Sainsbury’s cuts dividend

SUPERMARKET chain Sainsbury’s is set to slash its dividend and put the cash into cutting prices and improving the quality of its food, it was reported yesterday.

Chief executive Justin King is to make the announcement in 10 days when he unveils plans to put the struggling group back on track, according to The Sunday Telegraph.

It is believed that the dividend could be cut from its current level of 15.7p to 7p, in a move that would mean a massive reduction in income for major shareholders the Sainsbury family.

Another report claimed Mr King is planning to cut around 750 jobs as part of his restructuring plan.

Sources were quoted by the Sunday Express as saying Mr King had decided the company’s head office could function equally effectively with around 25% fewer employees, although the final number was still to be decided.

A spokeswoman for the group refused to comment on any of the claims today.

The supermarket group has been losing ground over the past year to rivals Asda and Tesco due to stiff price competition.

Analysts say it has been left behind in the move into non-food areas such as electronics, music and clothing, where margins are much higher.

Mr King, who was parachuted into the company in March after a successful stint in the food department of Marks & Spencer, is due to update investors about his plans on October 19.

According to The Sunday Telegraph, he is determined to improve product lines and sales after a major supply chain investment failed to improve performance.

A reduction in the dividend would save the company £150 million. It is believed the Sainsbury family is braced for a massive reduction in income, since it controls 35% of the group.

It is also thought the Financial Services Authority is investigating whether Sainsbury’s needs to issue a profits warning after it allegedly gave a selective briefing to an analyst.