Following today’s release of Sainsbury’s figures for H1 FY2021/22; Zoe Mills, senior retail analyst at GlobalData, a leading data and analytics company, offers her view: “While Sainsbury’s has reported a muted set of results for H1 FY2021/22, against a strong comparative period that was heavily impacted by the COVID-19 pandemic, the grocer will be pleased to have maintained growth in its overall business, with total retail sales (excl. fuel) up £35m to £14,871m on H1 FY2020/21, driven by its grocery (+0.8%) and Tu (+33.6%) propositions. Sainsbury’s has also reported a strong profit performance with underlying profit before tax up 23.3% for the period, ensuring it has maintained its full-year profit guidance. Nevertheless, despite this positive performance, Sainsbury’s retail like-for-like growth of 0.3% remains behind that of competitor Tesco which achieved +1.2% UK like-for-like sales for the 26 weeks ending 28 August 2021 and Sainsbury’s must focus on price to retain appeal given both grocers’ similar Aldi price matching strategy. Expanding to more products should be the next step, particularly in the run-up to Christmas as consumers face increased costs through energy price rises.
“As in Q1, these results continue to be marred by its general merchandise offer, with Argos’ sales declining 7.3% on H1 FY2020/21, as it faces increased competition from other non-food specialists that reopened from 12 April 2021 and it begins to feel the impact of supply chain issues that are affecting several sectors in the UK. In comparison, GM sales within its Sainsbury’s supermarkets rose 2.4% over the same period, and the grocer must utilise seasonal space to entice food shoppers to invest in Christmas decorations and gifts, supporting sales as it comes up against a tough total GM comparative in Q4 FY2020/21 (+17.6%).
“Momentum in its online business continues to slow, with online groceries up 12.8% in H1 FY2021/22 versus 102.2% in the comparative period. However, against such strong previous results, this can only be deemed a success as its online grocery penetration reached 17% this half compared to 15% H1 FY2020/21, highlighting that while some consumers are returning to shopping via physical stores, the pandemic has had a lasting impact on this channel, and it will continue to play a more prominent role in the sector. Sainsbury’s focus on ‘On Demand’ groceries, through its Chop Chop service and partnerships with Deliveroo and Uber Eats, will further aid online sales and ensure it remains competitive. This is essential given that Tesco is continuing to trial its Tesco Whoosh proposition and recently announced its partnership with Gorillas, as well as rising competition from rapid grocery services such as Getir. With these start-ups having a more limited presence outside of city centre locations, Sainsbury’s must utilise more of its store portfolio to get ahead in this fast-growing area with the food & grocery sector.”
“Chris Daly, CEO of the Chartered Institute of Marketing, said: “Sainsbury’s positive interim results prove it has successfully overcome supply chain issues in the short term at least. The supermarket giant’s public advocacy and support of global efforts to combat climate change has been well received, especially in the build up to COP26.
“It has pledged to become net zero in its own operations by 2035, five years earlier than its original ambition. This positive commitment aligns with the UN’s goal to limit global warming to 1.5 degrees. The retailer has launched ‘Sainsbury’s Global Farm’ – an online resource that connects customers with different suppliers around the world – to showcase the good work its food producers are already doing to tackle climate change.
“However, with 63 per cent of consumers believing that many brands only get involved with sustainability for commercial reasons – as opposed to ethical ones – Sainsbury’s must be mindful to avoid accusations of ‘corporate grandstanding’ or greenwashing.
“If Sainsbury’s is to continue winning the hearts and minds of consumers, it must ensure its commitments are perceived as authentic and carefully tow the line between intentions and tangible actions.”
Nick Everitt, director of advisory at Edge by Ascential, said: “Sainsbury’s is under a lot of pressure to compete with other major players in the UK grocery space, particularly amidst a backdrop of supply chain strains and inflation. Looking ahead, it must continue to focus on its online growth and digital transformation, and will need to upweight its investment in fulfilment if it wants to stand a chance at competing with its rivals.
“The likes of Tesco and Morrisons are quickly catching up with high consumer expectations for speed and convenience. In October, Tesco made waves with the announcement it was partnering with ultra-rapid grocery startup Gorillas on a pilot project that will see Gorillas set up micro-fulfilment sites at five large Tesco stores, where they will pick, pack and deliver to customers in certain areas within 10 minutes. Also in October, Morrisons launched Deliveroo Hop in partnership with Deliveroo, which will operate from delivery-only grocery stores.
“Sainsbury’s is also up against the threat of Amazon, which is continuing to expand its footprint in UK grocery. We could soon see Amazon make a bid for an existing brick-and-mortar supermarket chain and Sainsbury’s could be a target for acquisition. Sainsbury’s established foothold and expertise in the grocery sector, together with Amazon’s ambition and prowess in digital transformation, means this pairing could be a force to be reckoned with.”