In newly released figures for the first half, Sainsbury's has reported a recovery in underlying profit performance for the 28 week period to 21 September 2019. This was driven by an improving trend in grocery sales as customers responded to investments in lower prices, new value brands and improvements to service and availability.
- Improvement in grocery sales through period from -0.5% in Q1 to +0.6% in Q2
- Group sales broadly flat, down -0.2% to £16.9bn
- Retail sales excluding fuel, -0.6% (-1.0% LFL)
- Underlying profits of £238m (ahead of market consensus of £235m) but statutory profit before tax fell from £107m to £9m, largely reflecting one off costs relating to property review
- Net debt down by £568m to £6.8bn
Update on six strategic priorities
1. Be more competitive on price: Prices lowered on over 1,000 high volume lines and new value brands launched to replace Basics - 200 lines expected to be launched by March 2020.
2. Offer distinctive products and new categories: Relaunch of the Taste the Difference range underway and focus on building portfolio of distinctive, exclusive and owned brands. Sainsbury's also expects to have rolled out its new beauty hall proposition to 100 stores by Christmas as part of its wider strategy to maximise the use of supermarket space and make the most of opportunities in growth categories.
3. Make shopping more convenient, supported by great service: SmartShop self scanning technology now introduced to 350 supermarkets and self checkout technology across supermarkets and convenience stores. Online grocery sales are up 8% and a tailored convenience store offer to each local market is driving strong growth.
4. Drive efficiency to invest in the customer offer: Sainsbury's aims to structurally reduce costs by £500m. Key initiatives include delivering cost savings to offset the impact of operating cost inflation and simplifying how the Argos and Sainsbury's teams work together.
5. Grow connected services: Sainsbury's is scaling back its Financial Services business to focus on digitally led products that are directly relevant to Sainsbury's and Argos customers. The new digital Nectar app launched in October now has 2.1 million users.
6. Provide a seamless customer service: Sainsbury's is integrating its digital offer into a single application to make it easier for customer to access all of its brands and services, conscious that digital customers spend three times the amount of in-store customers.
Positive momentum across the business
Commenting on performance group CEO Mike Coupe said: “We have created positive momentum across the business through strategic investments in our customer offer. We have lowered prices on every day food and groceries, launched a range of value brands and are more competitive on price than we have ever been. We are investing in hundreds of Sainsbury’s and Argos stores, introducing new products and services and continually improving service and availability. As a result, customer satisfaction has increased significantly year on year.
“We have set out our plan to create one multi brand, multi-channel business. This will make the combined Sainsbury’s and Argos offer much more accessible for customers and gives us the opportunity to make our business more efficient.”
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