Sainsbury’s is back in the black after posting a £548m statutory pre-tax profit. Here are five things we learned from its full-year results.
Sainsbury’s is ramping up its store refurb programme
The Big Four are all striving to make better use of their larger sheds and Sainsbury’s is increasing its efforts to bring customers back to its big-box branches.
The grocer has already been testing a new format at six of its larger stores in Alperton in London, Devizes in Wiltshire, Emersons Green in Bristol, Harpenden in Hertfordshire, Morecambe in Lancashire and Tamworth in Staffordshire.
The pilot includes changing the layout of stores to make them more convenient to shop, dedicating more floor space to Sainsbury’s non-food offer, introducing new fresh food counters such as patisserie and takeaway and trying out new checkout options to speed up the shopping trip.
Sainsbury’s has pledged to invest between £50m and £75m this year on revamping 25 of its largest shops to bring the “key learnings” from the new formats into more of its estate.
The investment represents 10% to 15% of Sainsbury’s annual capital expenditure, emphasising how much focus boss Mike Coupe and his executive board continue to place on reinvigorating its larger shops.
Tu clothing is going great guns
Sainsbury’s Tu clothing brand is homing in on becoming a £1bn-a-year business, having recorded sales of just over £900m in the 2015/16 financial year – an 8.5% uplift on the previous 12-month period.
That performance was driven by growing volumes as Tu became the sixth largest clothing retailer by volume in the UK, having usurped Matalan.
But although Tu is going great guns in its own right, the brand has also had a positive knock-on effect on Sainsbury’s core grocery business, by drawing people into stores.
Coupe revealed that Tu clothing’s standalone website is performing “ahead of expectation”, with 70% of all Tu orders placed online now being fulfilled via click-and-collect points across the supermarket giant’s estate.
We may be reaching peak c-store
Sainsbury’s had 773 convenience stores at the end of its financial year on March 2, having opened 69 shops under the Local fascia during the 52-week period.
Total convenience sales grew 9.3% year on year, but that was driven by new space. Like-for-likes edged up just 0.4% across the 12 months, representing a slowdown on last year’s growth in convenience.
Finance boss John Rogers said Sainsbury’s expected to open between 40 and 50 c-stores this year – around 40% fewer openings year on year – because “sites are becoming more difficult to find”.
Coupe added that the grocer was taking a “very disciplined” approach to rolling out convenience stores and had “a clear idea” of what sites worked.
He emphasised that Sainsbury’s would only open stores where “there is an opportunity to make a return on the money we have invested”.
Coupe refused to put a figure on how large he thought the Sainsbury’s Local estate could become and added that only a “very, very, very small number” of Argos stores had the potential to be converted into c-stores should its acquisition of Home Retail go through.
After Big Four rival Tesco revealed that like-for-like growth at its Express c-stores was declining, as more customers seemingly return to its larger Extra braches, the convenience boom could have seen its best days.
Sainsbury’s has a need for speed
Coupe, Rogers and the rest of the Sainsbury’s executive board are staking their reputations on the £1.4bn deal to acquire Argos-owner Home Retail Group in a bid to create “a differentiated offer”.
Today the duo were pressed on what was so differentiated about a combined Sainsbury’s and Argos non-food offer compared to Tesco and its Direct homewares and general merchandise proposition.
Coupe’s response was clear – and emphasised the benefits Sainsbury’s sees in Argos’s fulfilment network, including its Fast Track same-day delivery proposition.
“It’s different in terms of speed,” he said. “I don’t think you could order [from Tesco] on your mobile phone now and have it delivered to one of our shops across the road within four hours.”
As Sainsbury’s strives to serve its customers “whenever and wherever they want”, Coupe’s need for speed when it comes to delivery is what he hopes will set it apart from its Big Four rivals and allow it to put pressure on non-food giants including Amazon and John Lewis.
JS takes great pride in loyal staff
Like many of its retail rivals, Sainsbury’s today heaped praise on the job done by colleagues across the business.
Back in August, the supermarket giant revealed details of a 4% pay rise for 137,000 shopfloor staff to take their pay above the Government’s national living wage of £7.20 per hour, but it is doing more than that to ensure its workers remain motivated and loyal to the business.
The grocer said today that almost 28,000 of its employees had worked for Sainsbury’s for 15 years or more – that’s almost a fifth of its workforce.
As the theme of productivity takes centre stage, Sainsbury’s said it took pride in the way it offers workers “job satisfaction, a wide range of job roles, career progression and flexibility” in a bid to drive “strong loyalty” within the workforce.
Sainsbury’s has also introduced ‘Great Place to Work’ forums at all of its stores. The forums are made up of colleagues nominated by their peers to represent them, giving staff at shopfloor level a voice to help “shape and guide change in the business”.