LONDON (FNS) -- J. Sainsbury plc said last week it has no plans for the time being to increase its 20% holding in Giant Food, Landover, Md., because of the chain's recent poor performance and Sainsbury's need to improve the profitability of its wholly owned subsidiary, Shaw's Supermarkets, East Bridgewater, Mass.
Sainsbury revealed the policy in reporting a 16.6% drop in operating profits at Shaw's to $36.2 million on a 16.4% rise in sales to $1.49 billion for the 28 weeks ended Sept. 20.
This compares with operating profits of $43.4 million on sales of $1.28 billion in the corresponding period a year earlier.
David Bremner, Sainsbury's director responsible for the United States, said Shaw's was hit by the $8 million in costs associated with a strike at the chain as well as continued losses at its Connecticut stores.
In its established market areas of Massachusetts, Rhode Island and New Hampshire, operating profits rose 4% to $52.7 million.
David Sainsbury, the company's chairman, and Bremner both strenuously denied reports that Sainsbury might be looking to withdraw from the United States in order to concentrate on its core U.K. operations in food and do-it-yourself retailing.
Some analysts have called for the move to give the retailer more focus in the battle for market share leader with Tesco.
"The profitability of Shaw's is in the top quartile of American chains and therefore it's a good investment," David Sainsbury said. He said the company will roll out plans to extend the brand while improving stores.
"That will involve a three-year time period to achieve a turnaround in profitability. Thereafter the big question is can we add shareholder value by increasing our investment in Giant. It's had a disappointing performance and clearly now is not the time to increase our investment in Giant."
However, he said Giant remains a strong retailer with a large share of the market in the Washington and Baltimore areas.
Sainsbury is moving to improve the performance of Shaw's in Connecticut by introducing new, European-style displays; increasing the deli offering and bakery displays; and, for the short-term, reducing the prominence of private-label products in favor of major brands.
It also has boosted marketing to establish Shaw's as the lowest-priced food retailer in the state, David Sainsbury said, adding that it has installed about 4,000 compare-and-save signs in each store to help transmit this message.
In addition, Shaw's is re-evaluating its new, larger-format stores to improve their performance. These stores, of about 65,000 square feet, are being refocused to make them "more powerful," David Sainsbury said.