Sainsbury’s is set to cut thousands of jobs through the closure of its hot food counters and cafes, and by reducing senior management roles, amid concerns about higher labour costs from impending tax rises.
Sainsbury’s stated that the move was part of its three-year ‘Next Level’ strategy, which aims to bring more of its core food ranges to customers, while simplifying central divisions and management structures.
To create more space for its fresh food ranges, the company wants to close its remaining patisserie, hot food and pizza counters. In a further move to simplify the business, Sainsbury’s also plans to close its remaining 61 in-store cafés, subject to consultation. The retailer noted that the majority of its shoppers do not use the cafés regularly, with options offered by its third-party partners proving more popular.
Meanwhile, Sainsbury’s is making changes to its central management structures to support “faster decision making and drive performance” at both its supermarkets and Argos business. Rhian Bartlett will become Chief Commercial Officer, Sainsbury’s, and Graham Biggart will take on the roles of MD Argos and Chief Strategy and Supply Officer. Patrick Dunne, Director of Property and Procurement, will also join the company’s Operating Board as Chief Property and Procurement Officer and MD for SmartCharge.
As part of its programme to deliver £1bn of operating cost savings, all the group’s head office departments are being reorganised to become dedicated to the different needs of its Sainsbury’s and Argos businesses, while creating “fewer, bigger roles with clearer accountabilities”. Sainsbury’s stated that the changes were designed to drive faster decision-making and bring costs down through an estimated 20% reduction in senior management roles over the next few months.
Overall, the proposals are expected to result in the reduction of more than 3,000 roles from across its business. Sainsbury’s noted that it was in discussions with staff affected and would explore redeployment opportunities where possible.
“We launched our Next Level Strategy almost a year ago and are totally focused on making good food joyful, accessible and affordable for everyone, every day. As a result, we’re seeing real momentum across our business, with a best-ever value position, leading quality and increasing market share,” said Chief Executive Simon Roberts.
“As we accelerate into year two and beyond of our strategy, we are facing into a particularly challenging cost environment, which means we have had to make tough choices about where we can afford to invest and where we need to do things differently to make our business more efficient and effective.
“The decisions we are announcing today are essential to ensure we continue to drive forward our momentum but have also meant some difficult choices impacting our dedicated colleagues in a number of parts of our business. We’ll be doing everything we can to support anyone impacted by today’s announcements.”
The job losses follow recent warnings by some of the UK’s largest retailers that they could be forced to cut back on staff and raise prices due to the increase in employer national insurance contributions from April and the rise in the national minimum wage.
Clive Black, head of consumer research at Shore Capital, said Sainsbury’s had unveiled “further, increasingly necessary steps post the autumn Budget, to manage its cost base to enable ongoing investment”.
He added: “Whilst very difficult, such steps are necessary, especially in the face of very considerable UK government-sourced cost expansion.”
NAM Implications:
- Either cut job numbers or raise shelf prices…
- Looks like Sainsbury’s wants to try the ‘job-cut’ route before raising prices…
- …in their attempt to deliver £1bn of operating cost savings.
- Anticipate similar moves from rivals in anticipation of Autumn Budget tax increases…
