Sainsbury’s Cuts 3,000 Jobs as Grocer Seeks Cost Savings

(Bloomberg) — J Sainsbury Plc will cut 3,000 staff and close its remaining cafes, as Britain’s second-largest supermarket chain steps up a cost-saving drive after the government announced higher taxes on businesses.

The move will involve a restructuring of head office positions and a 20% reduction in senior management roles, Sainsbury said Thursday. Overall, the cuts will affect about 2% of the grocer’s 148,000 staff.

The company’s shares fell as much as 0.7% in London, and are down 8% in the past 12 months through Wednesday’s close.

Sainsbury said the cuts are part of a plan to save £1 billion ($1.2 billion) in costs it 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-raising budget in October, which added significant costs to businesses including a higher payroll levy and minimum wage.

Sainsbury said this month it would split a staff wage increase in two for the first time in a bid to spread out costs.

The job cuts at the grocer add to a slew of evidence underscoring the budget’s impact on British retailers, some of the country’s largest private sector employers. Ministers’ warnings about the dire state of the UK’s public finances have also weighed on consumer sentiment.

The layoffs are necessary for Sainsbury to remain competitive “especially in the face of very considerable UK government sourced cost expansion,” said Clive Black, head of consumer research at Shore Capital.

Almost half of respondents in the latest British Retail Consortium survey said they expect the economy to get worse in the next three months. On Thursday, Associated British Foods Plc cut guidance for sales growth at its Primark discount fashion retailer, citing a downturn in spending.

Sainsbury said it will try to redeploy affected staff, while the closing of its 61 remaining cafes is subject to consultation. The supermarket said it will also close its remaining patisserie, hot foot and pizza counters, replacing them with popular aisle items including fresh food.

That follows rivals’ moves to scale back on more costly shop areas. Tesco announced plans in early 2023 to close all food counters and hot delis, saying shoppers preferred to buy packaged products from the aisles.

(Updates with shares in third paragraph, analyst comment in seventh.)

More stories like this are available on bloomberg.com