Sainsbury’s has warned that profits will be lower for the year ahead to maintain volume and share growth.
In what Sainsbury’s described as a “record year in grocery” full year sales excluding fuel grew 4.2% to £26.7 bn, in the 52 weeks to 1 March. Grocery sales were up 4.5% to £24.7 bn. Argos once again proved a drag, with sales down 2.7%, while GM and Clothing sales were flat.
Retail underlying operating profit was up 7.2% to £1,036 billion. Statutory profit after tax was £242m. However the supermarket warned it is “guiding towards lower profitability” in the year ahead as it looks to “maintain its competitive position”. It’s expecting retail operating profits to fall to around £1 billion.
While he largely dismissed the prospect of a price war sparked by Asda’s scramble to rebuild market share, CEO Simon Roberts said the flatter guidance would give Sainsbury’s the “capacity” to respond to any changes in the sector. A further £300 made in cost savings through its Save to Invest strategy over the year gives it further ammunition.
“There’s a lot of noise out there at the moment, but we have to look at what customers are actually paying. Above all else we are absolutely committed to stay in our strong position as we go into the year ahead.
“It’s an intensely competitive industry, with many strong competitors, but we are in the strongest position we’ve ever been in, and we intend to stay there,” Roberts added.
But Sainsbury’s is also investing. It’s planning its “biggest investment” in new store space for over a decade, with plans to open 40 new sites “in some of the UK’s most sought-after locations” over the next year.
Sainsbury’s biggest store investment for a decade
This includes 14 new stores already acquired from Homebase and Co-op, alongside organic store openings. Sainsbury’s is anticipating a total of 15 supermarkets will open during the year, with a further 25 Sainsbury’s Local stores in each of the following two years. In total the new stores will add 400,000 of new square footage to its estate, and the potential of 700,000 new customers.
The store refit programme to increase food space in key stores is also making progress. With 90 store transformations completed, it’s already added a further 90,000 sq ft of food space to its existing stores through its Next Level Strategy, with a further 200 earmarked for the same treatment over the next two years. The majority of additional space will not come onstream until the second half of the financial year, however.
Sainsbury’s will also boost profits further by expanding its Nectar 360 network, rolling out its network of digital screens, off the back of continued success in developing its Nectar Prices loyalty card programme.
“Our belief in the strength of Sainsbury’s offer has driven our decision to make our largest investment in expanding our store space in over a decade as we open supermarkets in key new locations and extend food space within many of our existing stores. It’s also why we continue to invest in our colleagues, whose dedication will power our Next Level plan. Working together with our suppliers we will continue to deliver for our customers, our shareholders and the communities we serve.”
The strong food performance was boosted by continued growth of its Taste The Difference range, with sales up 15%. Sainsbury’s is targeting £2 billion in sales of the range by the end of the year.
The number of shoppers “choosing to do their big shop” with Sainsbury’s each week grew by 18% during the year. Meanwhile, orders via its on-demand platforms were up 80% after it expanded its Chop Chop service to new regions.
“Our customer offer is the strongest it has ever been,” Roberts said. “We’ve expanded Aldi Price Match to more products than ever before in addition to offers on more than 9,000 products with Nectar Prices.
“Customer satisfaction with product availability is at record levels and we’re continuing to add more new, innovative products to our ranges. Nectar is taking our ability to create personalised value and loyalty to the next level and our long-term contracts with farmers and suppliers demonstrate our commitment to resilience and sustainability across the UK food system,” Roberts said.
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