Netto credit Flickr

All Netto UK stores are located in the north of England

Sainsbury’s has scrapped its Netto joint venture with all 16 stores set to close this summer and 400 jobs at risk.

The retailer said Netto would require “significant investment” in order to expand, while a statement alongside joint venture partner and Danish retailer Dansk Supermarked Group cited trading data, customer insights, expansion costs, the evolving food retail market and long-term strategies for each business as reasons for closure.

The Netto JV saw Sainsbury’s enter the discount sector around two years ago, while its closure is the second time Netto has left the UK in six years. The retailer initially said it would review the Netto business in November of this year.

Sainsbury’s said it would spend £10 million on winding down the business, which is based in the north of England. Of the 400 employees in the business, the majority will return to their parent company Dansk while the rest will be redeployed within the wider business wherever possible, Sainsbury's told FPJ.

The news comes as Sainsbury’s prepares its £1.4 billion takeover of Argos parent company Home Retail Group, and the company said it had chosen to focus on this instead.

Sainsbury’s chief executive Mike Coupe said to be successful, Netto would need to grow “at pace and scale”, and would require significant investment.

“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,” he 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.”

Per Bank, chief executive of Dansk Supermarked, said: “While we are pleased with the performance of the stores to date, it has become clear to both partners that the business requires greater scale over a short period of time to achieve long-term success.

“Reaching scale has been challenging due to appropriate site availability and therefore we decided together to end the joint venture and focus on other opportunities within our respective businesses.”