CEO Mike Coupe is looking at further opportunities to licence the Sainsbury’s fascia in a bid to reverse declining food sales.
Sainsbury’s is currently testing a seven-forecourt trial with Euro Garages. Sales uplifts are understood to be as high as 30% on the Spar conversions according to sources close to the jv - potentially spelling bad news for Spar’s supply arrangements in the future.
But with Sainsbury’s pre-tax profits falling for the third year running, down 8% to £503m over the 52 weeks to 11 March 2017, Coupe admitted: “When we look at how we grow our business, a franchising model has some attractions to it if we can maintain control of the brand”.
Like-for-like sales were down 0.6%, with supermarket sales declining by nearly 2%, while convenience sales were up 6% and online sales 8%. But Sainsbury’s only plans to open 25 convenience stores this year, down from 41 in 2016 and 66 the year before, despite originally targeting 100 c-store openings per year, due to the cost and scarcity of quality sites.
Sainsbury’s also brought forward to March 2019 plans to open 250 Argos stores in its supermarkets - six months ahead of schedule - as Argos delivered £77m in profits to prop up the results, and drove the chain’s sales forward by 12.7%.
It is also due to realise the £160m in projected cost savings six months earlier than planned, Sainsbury’s revealed at its preliminary annual results announcement on Wednesday.
Coupe insisted Argos was not propping up the food division and that it remained “resilient”. “The food business is a core part of Sainsbury’s and will be in the future,” he said.
With an uplift of 1%-2% “when we put Argos in Sainsbury’s stores, we know that one plus one equals more than two.”
Coupe also remained confident about the progress online. “We’ve never shied away from the fact that customer shopping habits are changing and it’s our job to adapt to those needs,” he said.
“Our grocery business is profitable and we’ve made significant investments in that,” he added. “We’ve opened a dark store to increase our capacity in London, the most penetrated online grocery market in the world, and a picking system in our stores.”
The increased focus on speed - which prompted Sainsbury’s to trial same-day delivery and click & collect last year - made no dent to profitability, he added. “It doesn’t really make much difference, it just changes the way we pick in our stores,” he said. “In fact, we offer two time slots per day so ironically that works better from an efficiency point of view.”
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