Another solid performance from Justin King and his team at Sainsbury’s has added some much needed cheer to the turbulent UK grocery sector.
Another solid performance from Justin King and his team at Sainsbury’s has added some much needed cheer to the turbulent UK grocery sector. In delivering total sales up 6.8% and underlying profit before tax up 7.1%, to £712m, the retailer has outperformed the market, increasing its market share to 16.6%, the highest for nearly a decade.
By focusing hard on values – not just value – Sainsbury’s has captured the mood of its customers, evidenced both by the response to its Brand Match marketing initiative and the appeal of its private-label business.
This robust performance is helping shape the agenda for the UK grocery market. And, it is a testament to the journey Sainsbury’s has undertaken since King took the reins in 2004 that the industry will be looking hard at how its rivals respond to these market-beating figures.
Against some tough industry comparatives, and commitments by market leader Tesco of a significant war chest aimed at regaining its lustre in the UK, Sainsbury’s will find the next year holds some extra challenges, and costs, to sustaining its recent relative outperformance.
The news that the grocer, like Tesco before it, will slow down its planned space growth is a telling indication of the changing landscape. Questions also remain about the retailer’s plans for international expansion, with the long-term hopes for UK growth generally limited. But, the effectiveness of Sainsbury’s marketing and its ability to tap into the consumer zeitgeist should breed confidence that performance can be sustained in the next 12 months.
The lessons of Clintons
The worrying news about Clinton Cards had an air of inevitability to it but that will be little relief to the 4,800 staff operating 820 stores who are now at risk of losing their jobs. The general conditions in the greetings card market meant a radical overhaul of the retailer was always necessary but the parallels with the recent failure of Game are also striking. Both retailers have been burdened with debt, both have made questionable acquisitions and each has struggled with the digitalisation of the market and supplier problems. While the path to recovery will be hard, the key for both retailers as they emerge from their troubles is to ensure the newly shaped businesses are relevant, both to their consumers and the changed landscape they operate in.