Strategic outlook for Sainsbury's - Full year 2018/19 results update May 19 - IGD.com
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Strategic outlook for Sainsbury’s
Full year 2018/19 results update
May 19
© IGD 2019
Key numbers
2017/18 2018/19 % Change 2017/18 Op 2018/19 Op % Change
Sales (£m)1, 2 Sales (£m)1 profit profit
(£m) (£m)
Retail 27,944 28,466 1.9 625 692 10.7
Financial 515 541 5.0 69 31 (55.1)
services
Total 28,459 29,007 1.9 694 723 4.2
Notes: 1 Ex VAT, inc. fuel 2 Excludes (£3m) acquisition adjustment for fair unwind of loans
Mike Coupe, Group CEO
“I am pleased to report that we have increased profits, reduced net debt and
increased the dividend.”
We completed the integration of Argos that we set out in 2016, delivering £160
million in synergies ahead of schedule. We completed a major transformation
of how we run Sainsbury’s stores and have made significant improvements to
store standards in recent months, which remain a focus. Customers continue
to rate us top for quality food and we are growing our premium ranges. We are
also focused on reducing costs so that we can invest to make commodity
products better value for our customers.
“I am confident in our strategy and also clear on what we need to do to
continue to evolve the business in a highly competitive market where shopping
habits continue to change.”
© IGD 2019 Source: Sainsbury’s, IGD Research Page 3
Annual results +2.1% +0.4% -0.2%
in brief Underlying
retail sales Retail sales LFL
exc..fuel
Profits resilient despite trading Inc..fuel exc. fuel
pressures
Underlying retail sales increased by 2.1% Solid trading in 2018/19
to £27.9bn, lifted by 12.3% growth in fuel
sales, reflecting both higher pump prices and 3.0%
volume growth.
2.0%
Retail sales rose 0.4%, driven by a 0.6%
sales increase from net new space. Within 1.0%
this, grocery contributed 0.6%, GM sales
were flat and clothing decreased -0.8%. 0.0%
LFL sales declined b 0.2%. Trading -1.0%
weakened through the year from +0.6% in
H1 to -1.0% in H2. -2.0%
Underlying profit before tax rose by 7.8%
-3.0%
to £635m, driven by a solid performance in
15/16 16/17 17/18 18/19
food, delivery of Argos synergies ahead of Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
schedule and reduced interest costs.
Mike Coupe, CEO
Profit after tax fell 29%, pushed lower by a
doubling of one off costs to £396m. Key Financial Services profits more than halved to £31m in line with previous
items included changes to pension costs, guidance, mainly due to bad debt charges, but also due to a more cautious
Sainsbury’s Bank transition costs, retail approach to unsecured lending.
restructuring costs and the Asda transaction.
Net debt fell by £222m but remains high at over £1.6bn. Sainsbury’s will now
£220m of cost savings were achieved focus more on cash generation to reduce debt faster.
during the year helping to offset the impact
of cost inflation and pay increases.
© IGD 2019 Source: Sainsbury’s, IGD Research Page 4
Sainsbury’s six
strategic
drivers
1 Creating a more distinctive food offer
2 Delivering on value
3 Upgrading supermarkets
4 Driving convenience growth
5 Expanding online grocery
6 Achieving Argos’ potential
© IGD 2019 Source: IGD Research Page 5
Updated New priorities for a new era
Priorities
Following the integration of Argos, Sainsbury’s has updated the priorities that
have guided its strategy since November 2014.
The four existing priorities have been adjusted to reflect the current position
of the business and areas of focus. The new addition is “Strengthen the
balance sheet” which sees Sainsbury’s targeting a £600m reduction in net
debt over the next three years through a more disciplined approach to cash
generation and capital allocation.
© IGD 2019 Source: IGD Research Page 6Supplier 1
Engage with
‘Destination
To ensure the relevance of its large stores
to changing shopper needs, Sainsbury’s is
looking to a wider range of partners, as well
implications Sainsbury’s’ as its Argos subsidiary, to create more
compelling retail destinations.
Sainsbury’s is bringing differentiation to its
Opportunities for
2 offer with limited numbers of specialist
‘unique’ brands
brands to add additional excitement to
specific categories.
Sainsbury’s private label ranges remain the
Target private key vehicle for its quality credentials,
3 label innovation especially in food, where it aims to reflect,
and lead on, evolving consumer tastes and
aspirations.
Opportunities in The rapid rollout of much improved beauty
4 beauty and departments and new wellness aisles to
wellness many more stores in 2019 create significant
opportunities for suppliers.
In the drive to meet the competitive
Focus on challenges from discount and online and
5 efficiency reduce debts, Sainsbury’s has ambitious
goals for cost saving across the supply chain
to ensure the business is fit for the future.
© IGD 2019 Source: IGD Research Page 7You can also read
