Blog: Dean BestSainsbury's swaps nostalgia for looking forward

Dean Best | 18 June 2009

A recent ad campaign from UK grocer Sainsbury's was loaded with nostalgia, celebrating the company's 140th birthday.

Yesterday (17 June), however, Sainsbury's chief executive Justin King opted to look forward rather than look back with the unveiling of ambitious expansion plans for the country's third-largest food retailer.

Riding the back of the City's recognition of Sainsbury's recent strong performance, King asked investors to provide GBP445m (US$725.4m) for the grocer's expansion.

By the end of the day, Sainsbury's hailed a "successful" share and bond issue, the funds from which it plans to use to grow its floor space by 15% - or 2.5m sq ft - by March 2011.

Sainsbury's shares may have tumbled on news of the fund-raising but that was an expected short-term reaction; in the long term, investors should be upbeat about the retailer's prospects.

The company's sales growth remains far ahead of Tesco and only slightly behind the levels being achieved at Asda and Morrisons - two more value-driven rivals.

Sainsbury's is planning an assault on the UK's fast-growing convenience channel. Last week, convenience director Dido Harding told the British Retail Consortium's annual conference that Sainsbury's is opening one c-store a week and aims to increase that rate to two outlets a week next year.

Nonetheless, King naturally knows that a lot of hard work remains, despite Sainsbury's obvious recovery.

He told analysts yesterday that Sainsbury's needs to "work harder" to convince UK consumers that it can offer value on branded products, as well as its fast-growing, own-label Basics range.

However, the way the business has performed in the five years since King took the reins means you would not bet against the Sainsbury's boss cracking that nut, too.


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