Sainsbury’s recovery has been an extended affair but is yet to be completed as Retail Week Knowledge Bank’s updated profile demonstrates.

Sainsbury’s recovery has been an extended affair but is yet to be completed as Retail Week Knowledge Bank’s updated profile demonstrates.

While management moves on from ‘Making Sainsbury’s Great Again’, the fact remains the grocer’s operating margin lags behind competitors Tesco and Morrisons, and thereby remains a percentage point or so short of a major quoted company standard.

Moreover, can improvement be sustained, given the evolving circumstances? Certainly, progress is still being achieved on most fronts, with ‘Great Food at Fair Prices’ being reinterpreted in the latest marketing stance of ‘Live Well for Less’; the grocer’s emphasis on value and quality is in tune with consumer priorities.

However, deteriorating like-for-like sales growth remains a problem.

Operational efficiency savings and property deals are crucial to an upgraded store-opening programme that continues apace in under-represented regions, and to store extensions in Sainsbury’s heartland.

Last year, a 100% off-setting of cost inflation was achieved; this year, higher inflation has reduced that target to 75%. Nevertheless, the key new space plans continue, although new convenience stores this year have quietly been trimmed from 100 to about 75.

On the benchmarking front, Retail Week Knowledge Bank calculated that the decline in sales densities is steeper than top-line figures suggest if rising online grocery sales and VAT are excluded: the latter’s inclusion also partially masks the impact of the planned increasing proportion of non-food sales and the impact of bigger stores on net densities, which are calculated to have fallen to about £950 per sq ft. 

More positively, Sainsbury’s staff costs to sales ratio is down to 10%, now better than most close competitors.

Rumours of renewed international aspirations underline increasing management confidence and vision, but are perhaps a distraction given these shorter-term internal and external considerations, especially as the upshot is that the profit equation is tightening when margins still need to edge up.

  • Robert Clark, Director, Retail Week Knowledge Bank

Retail Week Knowledge Bank

Retail Week Knowledge Bank profiles the top 250 UK retailers, including company profiles and sector screening tools, and is included in your Retail Week subscription package. View the full company profile of Sainsbury’s.

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