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Sainsbury's and Dansk Supermarked end Netto joint venture

Staff writer ▼ | July 5, 2016
Sainsbury's and Dansk Supermarked Group said that following a comprehensive review, they will end their joint venture of trial Netto UK stores that was launched in June 2014.
Working together   "We have made the difficult decision"
It is expected that the 16 stores will continue to trade throughout July and will close during August.

The Netto UK JV was aimed at exploring the fast-growing discount grocery retail segment in the UK. However, DSG and Sainsbury's have decided to call it a day after assessing trading data, customer and operational insights, expansion costs, the evolving food retail market and long-term strategies for each business.

Sainsbury's chief executive Mike Coupe said the company would now focus on its acquisition of Home Retail.

"Netto is an excellent retailer with talented leaders and colleagues and we have learnt a great deal about the discount grocery retail market from this trial venture. Since we first envisaged the trial, almost three years ago, the grocery sector has evolved significantly and we launched our strategy 18 months ago to address these changing dynamics," said Coupe.

"Against this backdrop, as planned, we carried out a detailed review with DSG on the future of Netto. To be successful over the long-term, Netto would need to grow at pace and scale, requiring significant investment and the rapid expansion of the store estate in a challenging property market.

"Consequently, we have made the difficult decision not to pursue the opportunity further and instead focus on our core business and on the opportunities we will have following our proposed acquisition of Home Retail Group. Our learnings from the trial will undoubtedly benefit the rest of our business as we move forward."

The companies said they are working together to minimise the impact of this decision on Netto colleagues.

The current carrying value of the investment in the Netto JV within J Sainsbury consolidated group accounts is £20m, which will be written down to zero.

The UK supermarket operator is also expecting cash costs of around £10m to wind down the business and said these amounts will be excluded from underlying results.