Following today’s release of Sainsbury’s figures for the year ending 4th March 2023; Eleanor Simpson-Gould, Senior Retail Analyst at GlobalData, a leading data and analytics company, offers her view: “Despite reporting a 5% fall in operating profit before tax versus FY2021/22 Sainsbury’s has landed strongly at the top end of their expected guidance range at £690miliion, +18% on FY2019/20. In the battle to retain competitive edge Sainsbury’s revealed expenditure in excess of £560million to help counteract inflationary pressures over the last two years. Improved grocery sales across Q2-Q4 steadied Sainsbury’s market position, yet focus on transforming distribution capabilities in Argos has given Sainsbury’s a much needed profit boost in Q4 +9.3% like-for-like (LFL) amid a weak general merchandise market and poor home performance from rivals Tesco. Two years into Sainsbury’s Food First plan the competitive pricing strategy and exceeded targets in seasonal range innovation is paying off, while the launch of Nectar Prices should further improve Sainsbury’s attractiveness to value seeking shoppers in the year ahead. Casting a wider net for the coming year’s underlying profit before tax between £640-£700million the outlook for Sainsbury’s remains cautious against uncertain consumer spending in a market facing long term erosion from discounters.
“Following a disappointing Q1 result against COVID-19 driven performance in early FY2021/22, H2 delivered strong growth across grocery and Argos, with Q3 showing positive total retail growth +5.2% for the 16 weeks to 7 January 2023. Sainsbury’s general merchandise and Tu clothing continued to struggle across H1 and Q4 mirrored by a poor performance from Tesco in FY2022/23 results, who also reported difficult trading in clothing -1.2% and Home -6.4%. As such, the ongoing successful consolidation of Argos into supermarkets will provide a strong differentiation from big four competitors as a one stop shop to retain advantage. With more work to be done to drive growth in weaker Sainsbury’s general merchandise and Tu offerings, Sainsbury’s will need to ensure momentum is not lost by constricting product range at the behest of profits. Integration of Tu into Argos’s online platform, focus on full price sales and collaborating with third-party brands into FY2023/24 offering convenience and competitive value amid reduced consumer spending appears promising to improve total general merchandise performance.
“From Kantar’s latest twelve week review of grocery performance, Sainsbury’s has retained 14.9% market share behind Tesco. However, rivals Aldi have firmly retained their footing in the big four sending a clear message that the threat of discounters is ever present as 42.3% of 2,000 respondents reported for March they have or intend to switch to Aldi in GlobalData’s monthly consumer survey. Sainsbury’s Food First initiative must continue to take centre ground in strategy for FY2023/24, driving profit from Argos, Habitat and Tu will be the differentiation needed to support food and grocery market share gains ahead of discounters. Amid increasingly saturated loyalty initiatives arising in 2023 and relentless pressure to keep costs low, constrictive dialogue with suppliers will be vital to achieve further savings.”
