Sainsbury's and Dansk Supermarked to end Netto joint venture
Sainsburys and Dansk Supermarked Group have announced that they are to end their joint venture of trial Netto stores in the UK. It is expected that the 16 stores will continue to trade throughout July before closing in August.
The Netto UK JV was launched in June 2014 as the retailers looked to test the discount grocery retail segment in the UK.
Following the initial period of trial store openings, DSG and Sainsbury's said they have decided to end the venture after assessing trading data, customer and operational insights, expansion costs, the evolving food retail market and long-term strategies for each business.
Mike Coupe, chief executive of Sainsbury's, said: "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.
"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 two companies said they are working together to minimise the impact of the decision on Netto staff.
The current carrying value of the investment in the Netto JV within J Sainsbury consolidated group accounts is £20 million which will be written down to zero. Sainsbury's is also expecting cash costs of circa £10 million to wind down the business.
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