Sainsbury’s logical embrace of digital threatens more staff roles despite strong results, says GlobalData

Following today’s release of Sainsbury’s H1 figures for 2020/21, Thomas Brereton, senior retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘As Sainsbury’s forges ahead with its integration of Argos into Sainsbury’s stores, new Sainsbury’s CEO Simon Roberts has accelerated plans to close standalone Argos stores, a move (alongside the permanent closure of meat, fish and delicatessen counters in Sainsbury’s stores) that is forecast to result in the loss of 3,500 staff roles. While news of job cuts is always lamentable, it is born out of necessity of the “new normal”; 90% of Argos’s sales originated online during the period, supporting the claim that the current standalone Argos store portfolio (556 stores) is excessive.

“Outside of this unfortunate announcement, Sainsbury’s results are a pleasing read. Strong performances across its core food business and Argos have more than covered losses across clothing (sales down 18.3%, although online clothing sales are up 75%) and non-Argos general merchandise, with operational streamlining (a focus at Sainsbury’s over the past 18 months) allowing for a 27.0% rise in operating profit. Stakeholders should also be happy with the end financial result, with an announcement today of a 3.2p interim dividend per share as well as a 7.3p special dividend per share.

“Sainsbury’s core food strategy (“Food First”) appears to be a reasonable one, with a joint focus on lowering core prices, product innovation and online fulfilment. However, Sainsbury’s must be careful not to become too embroiled in a value battle with the likes of Tesco and Morrisons – one that, given Sainsbury’s slightly more premium reputation, Sainsbury’s will struggle to come out on top (noting similar plans at Waitrose and Co-op as well). Instead, Sainsbury’s should pour efforts into its product innovation, positioning itself as the supermarket of choice for those shoppers looking for meal inspiration. Sainsbury’s could take this concept even further, offering its growing base of online food shoppers (having more than doubled its online grocery capacity since March) better schemes to experience a wider variety of its new products.”