The latest results from Sainsbury’s demonstate that its plans are working despite the strong headwinds facing the grocery market.

Sainsbury’s latest results indicate just how incredibly challenging the grocery sector remains – underlying half-year pre-tax profits were down 17.9% to £308m, retail sales in the period fell 0.1% and like-for-like sales were down 1.6%.

The £308m profit figure is the grocer’s lowest half-year profit since 2010 and down from £375m last year.

Sainsbury’s plans to open 50 more stores in London and  the Southeast by 2014

Sainsbury’s Local

The latest results from Sainsbury’s reveal that its plans are working

The numbers paint the picture. And Sainsbury’s itself points out the likes of Aldi and Lidl are continuing to show their muscle – in the half year the grocer’s market share marginally declined to 16.5%, driven in particular, it says, by the growth of the discounters.

Customers are not making it easy for the big supermarkets – while disposable income is growing, that spare change is not finding its ways into the tills of the country’s mainstream grocers.

Despite the considerable price investment in the sector in a bid to win customers back, which in itself is eroding margins, shopping habits learnt in the downturn are not being readily forgotten.

Against that backdrop, where every pound is being fought for, the importance of a differentiated position is paramount.

According to plan

For Sainsbury’s, the good news is that it is showing more resilience than its mainstream competitors.

“When every pound is being fought for, the importance of a differentiated position is paramount”

Chris Brook-Carter

Its £308m profit figure may be pointing downwards but it is still ahead of analyst expectations of about £293m.

And its operating cost savings are ahead of plan, delivering savings of £115m in the first half with full-year savings now expected to be around £225m.

There are signs that Sainsbury’s plan is working. Its own £150m investment in price has helped it drive transaction growth of almost 3% and volume growth of 1%. And reduced promotional activity, it says, has helped it improve forecasting, drive better availability and reduce waste.

It is not clutching at straws to say these small signs of improvement are encouraging given the headwinds faced. And they are testament to a solid management team, a clear strategic vision, and Sainsbury’s ongoing understanding of its customers.

Looking ahead

Sainsbury’s has continued to walk the line between investment in price and the understanding that it must work to keep improving products and services to meet shoppers’ ever-increasing needs.

“Sainsbury’s has continued to walk the line between investment in price and the understanding that it must work to keep improving products and services”

Chris Brook-Carter

Chief executive Mike Coupe is also planning for the long term. He strongly believes that supermarkets of tomorrow need to offer a broader range of products and services while continuing to put food first. Its trials with Argos and Timpson are evidence of this.

And its five trial stores, putting technology and convenience at the heart of the shopping trip, are further evidence of where he sees shopping habits changing. A strategy he can ramp up when there is evidence of growth once more.

There have been fears Sainsbury’s would get squeezed between the ongoing success of the discounters and a resurgent Tesco.

But the grocer has proven once more what a robust business it is, testament to the value of a solid strategy enacted by a strong team.