Sainsbury's stays on the right track | RetailDetail

Sainsbury's stays on the right track

Sainsbury's stays on the right track

Pre-tax profits of Sainsbury’s for the full year (ending on 16 March) fell by 1.4% to 788 million pounds (935 million euro), while total annual sales of the third UK grocer increased by 4.6% to 25.6 billion pounds (30.4 billion euro). Like-for-like sales grew 1.8%, while the retailer’s net profit was 2.7% up. 

Cost down, profits up

According to Sainsbury’s, the fall in pre-tax profits is due to lower year-on-year property profits and and an increase in other one-off terms. The core business itself though performed well, with operating profit for the year increasing by 5.2%. As tax expenses are lower than last year, Sainsbury's can boast of a 2.7% rise in net profit to 614 million pounds (730 million euro).

 

Also important for a healthy bottom line were the operational cost savings of 100 million pounds (120 million euro). For the eighth time in a row, Sainsbury’s managed to increase its net profit. Also the retailer achieved its ten year high market share, accounting for 16.8% of the market. According to Kantar, last year’s share was 16.6%. 

 

Record identical sales growth

Sainsbury’s managed to increase its identical sales for 33 quarters in a row: a new record for the chain. A disappointing 0.9% identical growth in the third quarter – including the important Christmas period – was compensated for by the fourth quarter, when Sainsbury’s recorded the highest like-for-like growth of the year, at 3.6%.

 

For the full year, identical sales grew by 1.8%. This is lower than the 2.1% like-for-like sales increase recorded in 2012. As a result, Sainsbury’s is rather more cautious for the current year ending March 2014, with like-for-like sales expected to increase by just 1 to 1.5% “…reflecting the tough economic environment”, as the retailer states in its preliminary results review

 

Engines of growth: convenience and online

“Our focus on helping customers Live Well for Less is delivering good growth in sales and profit”, comments chief executive Justin King, pointing at the quality of private labels and services such as Brand Match. 

 

Important engines of sales growth are the convenience business, which outperformed the market average with a 17% increase to over 1.5 billion pounds (1.8 billion euro), and online grocery sales reaching levels of nearly one billion pounds (1.1 billion euro). Online grocery sales at Sainsbury’s soared by some 20%, compared to the prior year. 

 

Full ownership of Sainsbury’s Bank

Today Sainsbury’s also announced that it took full ownership of its banking activities, acquiring the 50% stake from Lloyds Banking Group. Sainsbury’s believes that this 248 million pound deal (just under 300 million euro) will be cash generative in later years and add to customer loyalty. 

 

“This is an exciting transaction for Sainsbury’s, which has the potential to deliver significant benefits to our shareholders, customers and colleagues”, King comments. “We expect the Bank to become an important source of profit diversification and growth, building on the strengths of our core business.”

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