Sainsbury's quits troubled Egyptian venture with £125m loss

By Lucy Baker
The Independent (UK)
10 April 2001

J Sainsbury, the UK's second-biggest supermarket group, is exiting its ailing Egyptian operations, at a loss of up to £125m.

The retailer said yesterday that it was selling its 80.1 per cent stake in the Edge chain to its minority partner, El Nasharty group, for an undisclosed sum. The move follows a campaign by Islamic activists to boycott some of the 100 Edge stores after rumours spread that Sainsbury's had links with Israel, something the company has denied. The UK group said yesterday its decision to pull out of the venture was not directly linked to the controversy.

Sir Peter Davis, Sainsbury's chief executive, said: "There is a question of whether we should have gone into Egypt in the first place." Sainsbury's bought an initial 25.1 per cent stake in Edge in March 1999, at a time when it was wrestling to halt the decline of its core UK operations. Sir Peter said the decision to exit the underperforming business, which registered an operating loss of £10.2m in the half-year to 14 October, would leave the group free to concentrate on its UK supermarkets and Shaw's stores in the United States.

The comments came as Sainsbury's reported a 4.8 per cent jump in like-for-like sales for the fourth quarter, ended 31 March. Sir Peter admitted the figures had benefited from a weak comparison last year. He added that the sales uplift had been helped by a run of promotional activity, leading some analysts to question whether margins would suffer at the expense of higher sales.

The shares closed up 9.75p at 400p after Sir Peter said second-half profits for the core supermarkets unit would be higher than last year, despite a poorer than expected performance from the group's recently divested Homebase business and the Egyptian division.

Separately yesterday, Sainsbury's announced that it was selling 22 Homebase stores for £156m to British Land. The freehold properties were transferred back to Sainsbury's after being earmarked for disposal by Schroder Ventures. The private equity firm paid £750m for the rump of the Homebase assets last December.