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.