Sainsbury’s hailed the success of its ‘Food First’ strategy today after posting robust year-end figures, driven by its core grocery business making market share gains and cutting costs.
Over the year to 2 March, the group’s retail sales were up 6.8% to £30.62bn. Grocery sales climbed 9.4%, and general merchandise was up 1.2%, although clothing sales slipped by 6.4%.
Group like-for-like sales rose 4.8% in the fourth quarter, although this was its slowest growth for more than a year and down from the 7.4% rise in the previous three months.
Retail underlying operating profit rose 4.3% to £966m, with Sainsbury’s saying that volume-driven grocery profit growth and further cost savings had helped offset weaker general merchandise profits.
The group noted that volumes in its supermarkets picked up in the second half, helped by the rollout of its Nectar Prices scheme. It saw increases across all major categories, with own-label participation increasing 93 basis points as shoppers managed their budgets whilst also treating themselves through its Taste the Difference range.
Looking ahead, Sainsbury’s expects retail underlying profits to grow by between 5% and 10%, driven by continued volume momentum in its grocery business, growth in Nectar profit contribution, and a “resilient” Argos performance amid its wider cost-saving programme.
The group cautioned it will face tougher grocery comparatives this year. However, it still expects to outperform the market as it embarks on its ‘Next Level’ strategy, which was unveiled in February. This has four key areas of focus, including offering more choice and consistent value for shoppers, a refined loyalty scheme, a transformation of its Argos unit, and cost savings to invest in areas such as technology and infrastructure.
“We said we’d put food back at the heart of Sainsbury’s and that’s what we’ve done,” said CEO Simon Roberts.
“Our food business is firing on all cylinders. We have the best combination of value and quality in the market and that’s winning us customers from all our key competitors, driving consistent volume market share growth as more customers choose us for their weekly shop and all their special occasions.”
Meanwhile, Roberts sees food inflation continuing to stabilise in 2024. “Inflation has come down, and we’d expect it to stay in low single digits for the year ahead,” he said.
Roberts told reporters that he did not expect anticipated poor harvests of crops such as potatoes and onions due to widespread flooding earlier this year to have a significant impact on food inflation.
He said he was confident Sainsbury’s could “protect availability without causing any impact for customers,” noting that commodity costs “in the main” were coming down. However, Roberts said there were still some inflationary impacts around, highlighting higher wages in the supply chain.
NAM Implications:
- Sainsbury’s patently well on the way back.
- Important for suppliers to ensure they have their fair share of sales & investment.
- Meanwhile, where does that leave Asda & Morrisons (and their suppliers) given their debt overhang?
