Sainsbury exits Egypt

April 9, 2001
Web posted at: 1251 GMT

LONDON (Reuters) -- Sainsbury, the UK's second-biggest food retailer, on Monday ditched its troubled Egyptian operations and reported a 4.8 percent jump in UK fourth-quarter sales.

Sainsbury said it was selling its 80.1 percent stake in the Egypt business, Edge, to its minority partner, the El Nasharty group, for an undisclosed sum

Sainsbury bought an initial 25.1 percent stake in Edge in March 1999 for 10 million pounds ($14.4 million). It spent another £40 million to take the loss-making investment to 80.1 percent.

The exceptional loss on the sale is at least double those two investments combined.

The Egyptian business ran into controversy last year after opening a big high-profile store near the Pyramids in Cairo, where Western-style supermarkets were still a rarity.

Some local traders, fearing they could not compete, tried to enlist the support of local religious leaders to try to persuade Egyptians to boycott the foreign supermarket chain.

At a time of strained Arab-Israeli relations rumours also started to spread that the group had Jewish or Israeli links.

Chief Executive Peter Davis said on Monday the business had been dogged by unfounded speculation of Israeli political links.  "I think we tried to do too much too soon," he said of the group's whole Egyptian foray.

                                UK sales buoyant

Meanwhile, Sainsbury [LSE: SBRY] shares gained about 2 percent in a sluggish market after the announcement of improved UK sales and the sale of another 22 Homebase hardware store sites to property company British Land for 156 million pounds.

Sainsbury reported 4.8 percent growth in group supermarket sales, excluding new-store sales and petrol pump receipts, in the quarter ended March 31 and said second-half profits would be higher than in the same period a year earlier.

"It's a very encouraging performance and I think better than what the market was expecting," said Sainsbury's Davis, appointed about a year ago to turn the then-struggling retailer around.

The group's U.S. supermarkets business, Shaw's, reported 2.5 percent growth in like-for-like sales in the fourth quarter.

 "Our intentions are to continue to grow the business in the U.S.," Davis said.

Sainsbury stock, which fetched about 580 pence in its late-1998 peak, touched a high of 405 pence before easing back to 397 pence, up 1.7 percent on the day.

Sainsbury sells Homebase unit – Dec. 22, 20001

Sainsbury

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