Sainsbury's stated the £203 million profit drop was due to a serious of store closures as it starts is £500 million cost-cutting drive. On an underlying basis, pre-tax profits decreased 15% year-on-year to £238 million due to the phasing of cost savings, higher marketing costs and tough weather comparatives.
On the contrary, convenience sales increased 2% and groceries online grew 7% from last year. Customer satisfaction has also increased by 3% year on year across Sainsbury's stores. It is expected that up to 15 convenience stores will be open by the end of the year. Convenience stores have been tailored to each local market and 172 supermarkets have been improved, with 400 predicted by the end of the year.
Currently, Sainsbury's has launched 123 value branded products with 200 due by the end of the year. In order to focus on offering customers quality products, they have lowered prices on over 1,000 high volume lines since February and launched 12 new value brands in key categories including meat, fish and poultry. Sainsburys also stated that in order to serve more customers’ needs they have sold more distinct ranges that has involved a relaunch of over 350 products across several categories in their £1 Taste the Difference range. This range has the biggest premium volume market share of major competitors.
Mike Coupe, Chief Executive said: "We have created positive momentum across the business through strategic investments in our customer offer. We have lowered prices on every-day food and groceries, launched a range of value brands and are more competitive on price than we have ever been".
Setting out their strategy to help customers live well for less, their strategic priorities include being competitive on price, offering distinct products and new categories and making shopping convenient.
Sainsbury's are the first retailer to remove single use plastic produce and bakery bags. They have committed to reducing plastic packaging by 50% by 2025 and are investing in loose produce.
Argos
The integration of Sainsbury's and Argos has provided the opportunity to structurally reduce costs by £500 million. They are focusing on digitally led products and services for Sainsbury's and Argos customers.
Mike Coupe states "We have set out our plan to create one multi brand, multi-channel business. This will make the combined Sainsbury's and Argos offer much more accessible for customers and gives us the opportunity to make our business more efficient. We offer great quality at affordable prices with convenient ways to shop"
Alignment with Coles
Sainsbury’s also announced on 11th November 2019 their strategic wholesale partnership with Australian retailer Coles. From 2020 Sainsbury’s plan to supply own label branded products (re-branded under the Coles brand) to Coles stores across Australia as well as online, which will include a selection of packed groceries and household products.
The move is part of Sainsburys strategy to partner within wholesale markets. Sainsbury’s already operate similar partnerships within Asia, Europe and the UK.
The NFU food chain will be looking further into this, to fully understand what this could mean for the UK grocery market.