Shore Capital analysts Clive Black and Darren Shirley said: “Justin King has led Sainsbury to another year of steady progression in still challenging economic and sector conditions. For that the ‘grandfather’ of the sector and his team now deserve considerable credit.”
They added that the business was “materially more resilient” than when he took charge. They attributed his success to a strategy based on “considerable empathy with its core customers”, which had attracted additional footfall in conditions arguably not suited to Sainsbury, and innovative ideas such as Switch 'n' Save and Brand Match.
By contrast, the management of Morrisons has been criticised for allegedly losing touch with its core consumers.
Sainsbury’s clear strategy had been complemented by good in-store execution and market leadership in the mass market (big four supermarkets’) delivery of fresh and chilled foods, said Black and Shirley.
General merchandise sales – particulary its ‘TU’ clothing brand and non-food sales – had performed well, exceeding £1bn.
Online grocery sales of about £1bn sales had achieved 20% growth year-on-year.
Black and Shirley concluded: “The group has outperformed its major peers and much of the market over the last seven years of consumer economic turmoil in the UK and so gained market share; to about 17% [according to Nielsen].”
‘Grandad to be around a while longer’
Commenting on speculation that King was soon to leave the business, Black and Shirley said: “From our perspective we expect ‘grandad’ to be around for a while longer yet but for succession planning to be an understandable and sensible feature for the chairman and the wider board.”
Shore Capital retained its ‘hold’ advice on Sainsbury stock.
Despite rising sales, Sainsbury’s profit before tax fell by 1.4% to £788M. But underlying profit before tax was up by 6.2% to £756M.
King said: “Our focus on helping our customers Live Well For Less is delivering good growth in sales and profit. Our key points of difference, such as the best quality own-brand, Nectar, Brand Match, coupon-at-till and industry leading service, are recognised by our customers.
“We continue to invest in offering customers choices of how they shop with us, bringing our food, clothing and general merchandise to more customers.
“While we see no near term change in the current economic situation, we remain confident that by continuing to invest in our long-standing strategy and by understanding and helping our customers, we are well positioned for future growth.”
Meanwhile, the supermarket confirmed today (May 8) that it will pay Lloyds Banking Group £248M for the remaining 50% of Sainsbury’s Bank it does not already own.
The retailer is the UK’s third largest after Tesco and Asda.
Sainsbury results – at a glance
- Underlying profit before tax up 6.2% to £756M
- Profit before tax down 1.4% to £788M
- Total sales (including VAT) up 4.6% to £25,632M
- Total sales (including VAT, ex fuel) up 4.3%
- Return on capital employed of 11.2%
- Proposed full year dividend of 16.7p, up 3.7%
- Profits excluded from underlying results down from £87M to £32M, reflecting fewer property disposals.