Sainsbury’s Profit sees 17% Slump as Chief faces Embezzlement Battle in Egypt

Sainsbury’s is set to announced a 17 per cent slump in its full-year profits this Wednesday, while it braces for an international battle against an Egyptian jail sentence imposed on its boss.

The beleaguered supermarket chain is expected to report pre-tax profits of just over £663 million, according to consensus estimates compiled by Reuters, down from £798 million the previous year.

“It reflects what has been a very challenging 2014, not just for Sainsbury’s but for all mainstream grocers,” said Darren Shirley, analyst at Shore Capital.

The decline in profits will be the latest dark cloud over the retailer, after an Egyptian court ruling emerged last week convicting chief executive Mike Coupe in absentia of embezzlement.

Sainsbury’s told the Sunday Express that the Egyptian authorities have set a further hearing today, although the court process is unpredictable.

The case, which centres around a failed deal between Sainsbury’s and a local partner in 2001, accuses Coupe of coming to Egypt last July to seize the local partner’s cheques that had bounced.

The supermarket giant said that this is an “impossibility” as Coupe was in London that day.

“We have taken all necessary steps to appeal against these groundless claims and will continue to do so,” it said.

The UK’s four largest supermarkets, Sainsbury’s, Tesco, Asda and Morrisons, have struggled to retain market share recently due to lower-priced entrants Aldi and Lidl, causing their profits and share prices to plummet.

Shirley warned that Sainsbury’s, which last month cut 800 jobs, may have to slash more if it scales back labour-intensive services to reduce costs and compete with its cheaper rivals.

Investors are unlikely to be cheered either, as the firm is expected to trim its bumper dividend.

Last year Sainsbury’s paid a full-year dividend of 17.3p a share, but Cantor Fitzgerald retail analyst Mike Dennis warned that it is likely to be cut.

“The fall in profit and squeeze on cash flow mean it is likely there will be pressure on Sainsbury’s ability to pay the higher dividend,” he said.

Rival Morrisons is releasing its first-quarter results on Thursday, with all eyes on new chief executive David Potts to see whether he will be announcing his strategy for the business going forward.

The latest Kantar data is expected to show a 0.5 per cent fall in Morrisons’ total sales for the 12 weeks to April 26.