Sainsbury’s unveiled better-than-expected profit for its 2023/24 financial year, as it claims to be winning customers from its rivals.
Underlying pre-tax profits were up 1.6% to £701m ahead of company expectations of between £670m and £700m and grocery sales soared 9.4% over the period.
CEO Simon Roberts says Sainsbury’s has “the best combination of value and quality in the market and that’s winning us customers from all our key competitors, driving consistent volume market share growth as more customers choose us for their weekly shop and all their special occasions.”
He believes the business has “real momentum” moving forward.
We take a look into what we learnt from the results and what Roberts is planning next for the supermarket giant.
Combining value and quality to succeed
Roberts says that Sainsbury’s has “transformed” its position on price.
“The big change for us is our value is so much stronger and our price perception is the best its been in six years.”
In the past year alone, Sainsbury’s invested £220m into lowering prices and cutting more than 4,000 items.
It has made a total investment of £780m over the past three years.
While Roberts notes that investment into price is vital, “it’s the combination of both value and quality that is really helping us win customers”.
Over the year, the grocer launched nearly 1,200 new products as it continued its mission to be “bold and ambitious on innovation”.
Roberts adds: “The challenge for Sainsbury’s a number of years ago was we had a great physical store offer but we were too expensive. We’ve been able to bring much better value to customers at the same time as really focusing on our quality.
“What we’re seeing is the reemergence of the full-choice supermarket as being something that customers really value.”
Stealing shoppers from rivals
Roberts says this heightened focus on value has helped Sainsbury’s to solidify its position as the retailer of choice for the big shop.
“Customers are really trusting our value now. A combination of doubling the number of products in the Price Match and launching Nectar Prices means we think we’ve got the most compelling offer of both value and quality in this market.
“That’s why so many more customers are coming to us for their weekly shop and that’s enabling us to grow our volumes ahead of the market and take share from all our competitors.”
Roberts says that while Sainsbury’s is taking share from the limited choice supermarkets, such as Aldi and Lidl, it is also gaining more volume from premium competitors than all other full-choice grocers.
“Customers are now seeing a place to come where they can get everything they need under one roof – great value, great quality and the quality of service.”
In the year, the grocer delivered Taste the Difference sales growth of 12% to £1.6bn, and it is now proportionately the biggest premium own-label brand of the full-choice grocers.
As inflation has begun to ease, Roberts has also seen “more evidence of customers starting to trade up” into Taste the Difference and branded products in his stores.
Navigating weather challenges
In recent months, British farming has seen exceptional rainfall and storms which have impacted the livestock, arable and horticultural sectors.
Roberts says that Sainsbury’s is “working really closely with its British farmers and suppliers”.
“We’ll be finding ways of making sure that if there are impacts on the specification of some of our crops, their size, their consistency, we will work with suppliers to make sure we optimise availability without causing an impact on price.”
One of the ways it aims to do this is “looking at different parts of the UK that have been less impacted so we can protect supply”.
While he notes that the issue spans more than just one crop, Roberts says that Sainsbury’s is “pretty confident that we will do a really good job supporting our farmers and to protect availability without causing any impact on customers”.
Confident in the year ahead
The supermarket giant is eyeing retail profit of more than £1bn for the year ahead – equating to growth of between 5% and 10%.
Roberts says: “We feel that our guidance for the year ahead is ambitious and we can see the most likely outcome being the middle of that range, somewhere near a 7% increase in retail operating profit year on year.
“If you look back in Sainsbury’s history, you can see how we’re starting to really drive not just better outcomes for customers and colleagues and all other stakeholders, but better outcomes for shareholders too.
“We feel very encouraged by the momentum. We think the signal in our guidance range shows the confidence we have, that we can deliver strong profit growth.”
Sainsbury’s chief financial officer Bláthnaid Bergin added that the grocer has “all the building blocks in place to deliver” that growth this year.
She noted Kantar’s latest data which found that in the 12 weeks to 14 April, Sainsbury’s gained 0.4 percentage points of share and now holds 15.3% of the UK grocery market.
As Sainsbury’s pushes ahead with its ‘next level’ strategy to become the first choice for food among UK shoppers, the grocer has a healthy appetite for growth.
1 Comment. Leave new
Sainsburys could afford to provide 20% discount to its hard working colleagues consistently every day. It will not only help colleagues with the struggle of rising food prices, but will also encourage colleagues to shop within Sainsburys, investing back into the business. This in turn will increase Sainsburys profits.