Sainsbury’s departing chief executive Justin King can hold his head high as he prepares to bow out after reporting a profit uplift of 5.3% in the year to March 15.
Sainsbury’s departing chief Justin King can hold his head high as he prepares to bow out after reporting a profit uplift of 5.3%.
In King’s 10-year tenure, profits have trebled and sales have grown by £10.3bn to £26.4bn.
But although Sainsbury’s beat the City’s profit consensus this week there is no doubt that the grocer is entering turbulent waters and King’s legacy will perhaps be judged more accurately in a year’s time. Growth is slowing and Sainsbury’s expects like-for-like sales in the current financial year to be similar to the last – up just 0.2%.
“Over the long term Sainsbury’s could emerge more differentiated if it can maintain its quality image”
Chris Brook-Carter, editor-in-chief
King has been consistent for the past few years about how changing shopper habits are now ingrained, and he has also been consistent about the price investments that competitors are making, saying there has been a perpetual so-called price war across his 30 years of retail.
But Morrisons last week fired the biggest salvo the sector has seen for some time by slashing the prices of some 1,200 lines permanently by an average of 17%. Some analysts have warned that Sainsbury’s could get increasingly squeezed if Tesco reacts to Morrisons’ latest campaign.
Incoming Sainsbury’s chief executive Mike Coupe will need to be clear about the grocer’s pricing strategy when he takes over in July, but he should also play to the retailer’s strengths and steer clear of scrabbling around at the lower end of the market.
Sainsbury’s – like most of the major grocers – is never going to be as cheap as the discounters. But the advantage it has over Tesco, Morrisons or Asda is that its customers don’t necessarily expect it to be.
While the grocer should always represent good value, it is the quality and provenance of its offer that also attracts customers.
If rivals step up their price investment further, then Sainsbury’s will suffer. But over the long term Sainsbury’s could emerge more differentiated if it can maintain its quality image. That could be its winning formula and would position it in a similar vein to Waitrose, whose boss Mark Price said last week the grocer is succeeding by being everything that the discounters aren’t.
King leaves the business in great shape, but on the cusp of an environment many food retail chiefs have described as the most challenging in their lifetimes.
If Sainsbury’s is delivering consensus this time next year, his legacy will live on.