Sainsbury’s bosses insist they will deliver says Sean McAllister
Sainsbury’s annual general meeting proved to be a bit of an anti-climax this week. The national papers had undertaken a concerted attack on its strategy and performance and predicted group chief executive Sir Peter Davis would face a barrage of fierce criticism from shareholders, while some suggested he was close to his “sell-by-date”.
However, the agm proved a rather civilised affair. Despite announcing that first quarter like-for like sales rose by only 0.3% (including petrol) - lower than many City predictions and a long way short of Morrisons’ and Tesco’s figures of 8.4% and 5.8% respectively - not one shareholder criticised Sainsbury’s strategy or called for Sir Peter to step down.
Quite the opposite. Some shareholders actually suggested Sir Peter should stay on as group chief executive instead of moving to become group chairman in March 2004.
And chairman Sir George Bull’s farewell agm speech about another £210m of cost savings and a second consecutive year of double-digit profit growth cast a spell over the meeting, enabling the shareholders to forget that Sainsbury continues to lose ground to its closest rivals.
Over the last year its market share has fallen from 17.7% to 16.8%, according to TNS. Over the same period Tesco has risen from 25.9% to 26.9% while Asda is closing in on second place with 16.3% share - up from 15.5%.
Sainsbury’s latest trading statement did little to suggest it could hang on to second spot, and if Morrisons wins clearance to take over Safeway, JS could even end up as the UK’s number four supermarket.
Much of the media criticism centred on its declining market share and its inability to match its competitors’ sales growth.
But, said Sir Peter, this is not the current focus. “Market share is important but doing the job properly and doing the investment programme, getting better at what we do, is also important. If we get that right, market share will follow and sales will increase,” he told shareholders. “I’m quite optimistic it will come. It is not a problem that at the moment we’re not quite growing as fast as a couple of our competitors.”
MD Stuart Mitchell said Sainsbury was being “unfairly bashed” and the criticism was disappointing for the company and for Sir Peter personally. “Nobody could have put more effort into the business transformation than Sir Peter and the board,” Mitchell told The Grocer. “If you look at the last year we would have got ticks in the box from the analysts and investors on everything bar like-for-like sales. We’re not complacent.”
Sainsbury’s hopes ride on its Business Transformation Programme, now entering its third and final year. Over the past year it has invested over £1bn in modernising its IT systems, rebuilding its supply chain and refurbishing and extending stores. “The next 12 months are most important in the delivery of our change programme, when the first two years of groundwork and capital investment really take hold,” said Sir Peter. “We will then have a leaner, fitter business.”
And Mitchell insisted that Sainsbury would be rewarded with a payback from its heavy investment programme next year.
The coming 12 months are therefore crucial for Sainsbury. Its new distribution centres at Hams Hall, Waltham Point, Stoke and Hoddesdon will all come on stream, its enhanced non-food offering will be in stores and a new chief executive should be in place.
But despite the upbeat messages, outside the cosy setting of the agm, Sainsbury and Sir Peter continued to receive flak from newspapers and analysts this week. That criticism will not fade until sales growth is boosted and lost market share recovered.
Sainsbury’s annual general meeting proved to be a bit of an anti-climax this week. The national papers had undertaken a concerted attack on its strategy and performance and predicted group chief executive Sir Peter Davis would face a barrage of fierce criticism from shareholders, while some suggested he was close to his “sell-by-date”.
However, the agm proved a rather civilised affair. Despite announcing that first quarter like-for like sales rose by only 0.3% (including petrol) - lower than many City predictions and a long way short of Morrisons’ and Tesco’s figures of 8.4% and 5.8% respectively - not one shareholder criticised Sainsbury’s strategy or called for Sir Peter to step down.
Quite the opposite. Some shareholders actually suggested Sir Peter should stay on as group chief executive instead of moving to become group chairman in March 2004.
And chairman Sir George Bull’s farewell agm speech about another £210m of cost savings and a second consecutive year of double-digit profit growth cast a spell over the meeting, enabling the shareholders to forget that Sainsbury continues to lose ground to its closest rivals.
Over the last year its market share has fallen from 17.7% to 16.8%, according to TNS. Over the same period Tesco has risen from 25.9% to 26.9% while Asda is closing in on second place with 16.3% share - up from 15.5%.
Sainsbury’s latest trading statement did little to suggest it could hang on to second spot, and if Morrisons wins clearance to take over Safeway, JS could even end up as the UK’s number four supermarket.
Much of the media criticism centred on its declining market share and its inability to match its competitors’ sales growth.
But, said Sir Peter, this is not the current focus. “Market share is important but doing the job properly and doing the investment programme, getting better at what we do, is also important. If we get that right, market share will follow and sales will increase,” he told shareholders. “I’m quite optimistic it will come. It is not a problem that at the moment we’re not quite growing as fast as a couple of our competitors.”
MD Stuart Mitchell said Sainsbury was being “unfairly bashed” and the criticism was disappointing for the company and for Sir Peter personally. “Nobody could have put more effort into the business transformation than Sir Peter and the board,” Mitchell told The Grocer. “If you look at the last year we would have got ticks in the box from the analysts and investors on everything bar like-for-like sales. We’re not complacent.”
Sainsbury’s hopes ride on its Business Transformation Programme, now entering its third and final year. Over the past year it has invested over £1bn in modernising its IT systems, rebuilding its supply chain and refurbishing and extending stores. “The next 12 months are most important in the delivery of our change programme, when the first two years of groundwork and capital investment really take hold,” said Sir Peter. “We will then have a leaner, fitter business.”
And Mitchell insisted that Sainsbury would be rewarded with a payback from its heavy investment programme next year.
The coming 12 months are therefore crucial for Sainsbury. Its new distribution centres at Hams Hall, Waltham Point, Stoke and Hoddesdon will all come on stream, its enhanced non-food offering will be in stores and a new chief executive should be in place.
But despite the upbeat messages, outside the cosy setting of the agm, Sainsbury and Sir Peter continued to receive flak from newspapers and analysts this week. That criticism will not fade until sales growth is boosted and lost market share recovered.
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