Simon Roberts has begun his reign as Chief Executive of Sainsbury’s by revealing a jump in grocery sales following strong demand during the lockdown period in both its stores and online. However, the group is still facing a hit of more than £500m from costs relating to running the business during the coronavirus pandemic.
Over the 16 weeks to 27 June, the group’s total retail sales rose 8.5% (excl. fuel) with like-for-like growth of 8.2%. Sainsbury’s no longer breaks down like-for-like performance by division.
Total grocery sales surged up 10.5% in the first-quarter quarter period, boosted by stockpiling, the return of big weekly shops, and good weather.
As flagged by other supermarket chains, Sainsbury’s online grocery operation also saw particularly strong performance as people did more of their shopping from home during the lockdown. Online sales climbed 87% year-on-year and orders grew from around 370,000 a week to over 650,000. The group highlighted that nearly 50% of new groceries online customers were new to the business.
Meanwhile, the group revealed that sales in its convenience store chain were down 5% due to weak performance in its city centre stores, where trade is usually driven by office workers, and the temporary closure of 26 outlets. However, this was partially offset by “very strong” sales growth in neighbourhood locations.
Sales in the group’s General Merchandise unit grew 7.2%, driven by a 10.7% increase in its Argos business which offset a 9.3% fall in sales of non-grocery products in Sainsbury’s supermarkets. All the 573 standalone Argos stores were closed for most of the period but the business benefited from strong online activity during the lockdown with home delivery sales surging up 78% and click & collect from Sainsbury’s outlets growing 53%.
However, clothing sales in its the group’s supermarkets plummeted 26.7% as consumers focused their spending on essentials.
Roberts praised the efforts of his staff during the crisis, adding: “We have worked really hard to listen and to respond to customers throughout the crisis. We have lowered prices on many key products as we continue to focus on lower regular prices. Our price position versus our competitors has improved in the quarter, Sainsbury’s key customer feedback scores are at record levels and we have gained market share.”
However, Robert’s highlighted that the coming weeks and months will continue to be challenging for its customers and staff with the business not expecting the current strong sales growth to continue as consumer spending weakens during the expected recession.
As flagged back in April, Sainsbury’s is also facing significantly increased costs related to maintaining supplies and keeping its customers and staff safe during the pandemic. The business has also been hit by weak sales of fuel, clothing and general merchandise within its supermarkets.
Sainsbury’s said it still expected flat underlying pre-tax profit for the full year, with the impact of the crisis expected to be more than £500m. However, it is hoped that this will be broadly offset by business rates relief and better grocery sales.
Roberts succeeded Mike Coupe as Chief Executive on 1 June. He said his focus so far has been on steering the business through the crisis rather than new strategic thinking.
Roberts said Sainsbury’s would examine the impact of the changes in how customers are now shopping. “Inevitably, things on the other side of Covid will be different and we’ll be looking at those issues as we move forward. But four weeks into the job it’s too early to speculate.”
With the impending recession in the UK also likely to mean a new wave of price battles with the discounters, Sainsbury’s could face pressure to further improve its competitiveness. Last Friday, Tesco revealed that it was more than doubling its Aldi price-match promotion as part of moves towards an EDLP strategy.
NAM Implications:
- Sainsbury’s have clearly optimised potential lockdown sales across the business – a good start for the new CEO.
- A key issue will be the scale and depth of the inevitable recession resulting from lockdown…
- …with discounters and Amazon determined not to sacrifice share or growth…
- …and super-savvy consumers worried about furlough transitioning into redundancy, unwilling to borrow money with authorised overdrafts costing 36%…
- …as interest/rental-holidays end.
- And for good measure, Tesco effectively kicking off a price war.
