Following today’s release of Sainsbury’s figures for FY2021/22; Honor Strachan, sector head for food & grocery at GlobalData, a leading data and analytics company, offers her view: “While Sainsbury’s has this morning reported an impressive 25% uplift in underlying profit before tax on 2019/20 (+104% on last year), reaching £730m, the market has responded to the grocer’s downcast forecast for the current financial year with profit guidance of £630m to £690m – at worst a 13.7% decline on 2021/22. Continued cost savings across the business – including integrating supply chains in the general merchandise division and reducing front of house store costs such as closing instore cafes and hot food counters – will not be enough to offset the investment it is making in price to limit the impact of inflation for customers and to protect volume performance.
“Over the year, Sainsbury’s has rightly invested in its value position and has recently extended its Aldi price match scheme which now includes 150 fresh products. This was essential to help shift consumer perception that the grocer is more expensive than rivals, especially now that we are in a period where consumers are looking to trade down and make savings. Sainsbury’s has also invested in product quality and innovation, namely in its Taste the Difference range (15% sales growth on 2019/20) which it must leverage as consumers consider trading down from branded goods to private label alternatives. However, we do expect a level of trading down across its private label price architecture which will impact revenue and margin performance.
“In recognition that core grocery will fail to deliver substantial revenue or margin gains over the next few years, Sainsbury’s is targeting growth areas such as food service and rapid delivery to supplement its performance. Instore third party foodservice outlets and takeaway/delivery services should benefit footfall and instore dwell time but rivals have tried and failed before with similar concepts and we expect consumers to cut back on eating out this year as budgets are squeezed. We expect the online and convenience channels to outperform superstores this year, particularly as urban footfall continues to improve – stimulating demand for food-on-the-go.”