Sainsbury said this week that investment in multichannel would continue to be a “fundamental part of our strategy for growth,” as it posted falling sales and profits in its latest financial year.
The supermarket said all traditional grocers needed to adapt to the changing way that shoppers now buy, in convenience stores and online as well as through large supermarkets. However, it said, forecasts still suggested that about 60% of grocery spend would be made in supermarkets in 2022. There was still an opportunity, it said, to meet all of busy customers’ needs under one roof, and customer loyalty would be critical to that. “Those grocers that evolve their offer to align to these changing habits would be the most successful,” said Sainsbury’s, announcing full-year figures today.
“Ensuring the size and format of our estate meets our customers’ varied shopping needs is a fundamental part of our strategy for growth and we will continue to invest strategically so that we can serve our customers whenever, wherever and however they want,” it said in its full-year statement. One in 12 of staff, it said, now works in the online operation while more one in nine works in convenience stores.
Sainsbury’s said Sainsbury’s said around 6% of its total store space would be under-utilised in the next five years, and it will use around half of this to expand its clothing and general merchandise space, while bringing in new concession partners such as Argos, which will open 10 small-format digital stores with branches over the next year, and Timpsons, GPs and dental surgeries. Group sales of £23.8m, excluding VAT and fuel, fell by 0.7% in the year to March 14.
Retail sales, excluding fuel, fell by 0.2% while like-for-like sales, which strip out the effect of store openings and closures, were down by 1.9%. Underlying pre-tax profits fell by 14.7% to £681m, from £798m last time. But a £753m charge relating to writing-down the value of its property, resulted in a bottom-line pre-tax loss of £72m, down from profits of £898m last time.
Online grocery sales bucked the downward trend, but at 7% growth was slower than in previous years. On average, it now delivers nearly 215,000 orders a week, 13% upon the same time last year, while it had its biggest online Christmas ever.
Chief executive Mike Coupe said: “The UK marketplace is changing faster than at any time in the past 30 years which has impacted our profits, like-for-like sales and market share. However, we are making good progress with our strategy, and our investment in price and quality is showing encouraging early signs of volume and transaction growth.”
He added: “We also have significant opportunities to grow our business. Clothing, general merchandise and financial services have all performed well over the past 12 months, as have our convenience and online channels. We have a significant ambition to grow these areas over the coming years.”
Sainsbury’s pointed to work to upgrade its website during the year to improve availability and the customer shopping experience, as well as adding general merchandise products to the online groceries site so that “customers get access to a similar range of products online as they would in store.” It is developing the technology to support seamless cross-channel shopping, as well as rolling out its click and collect grocery service around the UK. Investment in pricing and availability of delivery slots, it said, “has driven up order numbers and customer loyalty.” It will also open its first ‘dark store’ to service online orders in 2016 in Bromley-by-Bow and will invest in ways “to become increasingly effective in our customer interactions, giving them a smoother shopping experience such as through mobile ‘scan and go’.”
Focusing on the need to retain customer loyalty, it said “customers who shop all our channels spend more than twice as much as those who only shop for food in our stores.” Sainsbury’s uses the Nectar card loyalty scheme and it said that while it had halved from 2 to 1 the number of points shoppers can earn for each pound spent, it was reinvesting instead in giving more points in special bonus events.
Commenting on the figures, Hannah Maundrell, editor-in-chief of money.co.uk, said: “Sainsbury’s results are further proof that consumers have cottoned on to the supermarket sales tricks that have filled trolleys but emptied wallets for years. We’re making smarter choices about where and how we shop; the big chain stores need to keep up if they want to win back our trust and our custom.”