Brand overstretch adds to Sainsbury's struggle to make a crust

There was pathos in the J Sainsbury full-year results. Not in the numbers - everyone had expected those to be bad. But in the tragic tale of a Sainsbury sandwich. In its statement, the store chain painted a heart-wrenching picture of this light lunch item left miserably on the shelf at a large supermarket. Shoppers are instead satisfying their appetites with the easy-come, easy-go sandwiches that brazenly flaunt their charms in convenience shops.

Sainsbury, like other supermarkets, represents this as a change in shopping habits. But it would be more accurate to describe the trend as a failure of brand stretch. Consumers can be steered, but only up to a point. Then the elastic snaps. They tire of visiting stores so vast they get lost. Or they become bored - here's one to watch - of scanning and bagging their own purchases.

The numerical proof of the first proposition is a £628m charge for sites Sainsbury will no longer develop and big stores that lose money or barely break even. The figure, announced in November, combined with a few other write-offs and weaker sales to take Sainsbury to a pre-tax loss of £72m, the first for a decade. Underlying profits before tax were slightly better than expected at £681m, after a 14.7 per cent decline.

It would be tempting to believe that Sainsbury is weathering the shakeout in the grocery trade better that rivals Tesco and Wm Morrison, whose impairments have been bigger and losses heavier. The chain led by Mike Coupe is certainly in less of property pickle than Tesco, which has a hefty exposure to large, leased stores. However, Sainsbury's might equally be on course to stagger any destruction of value rather than taking one big hit. That would make Tesco a more compelling recovery play, if you agree with both chains that they can right size and repurpose for the era of the promiscuous sandwich buyer.

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