UK supermarket group Sainsbury’s has insisted that its continued investment in food differentiates the company from the rest of the country’s grocery retail market.
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The company today (11 November) posted a 3.7% jump in total revenues, while like-for-like sales excluding fuel climbed 5.7%.
Sainsbury’s also reported underlying pre-tax profits of GBP307m (US$514.2m) – an increase of 18.5% – for the six months to 3 October.
Speaking at an analyst meeting in London, chief executive Justin King said that growth had been driven by the retailer’s “really good” understanding of its customers, primarily gathered through its Nectar rewards card.
“We are continuing to invest in our food offer when rivals are cutting back,” King observed. “We think this has been important to underpin our performance so far and vital to our growth going forward.”
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By GlobalDataKing said that ethical issues had remained important to Sainsbury’s consumers, despite the economic downturn.
The retailer has responded by investing in converting its meat offering to Freedom Foods, expanding its offering of Marine Stewardship Council fish, increasing its offering of British seasonal produce and developing ethically sourced own brand products.
“We are the only retailer that in our Basics range – our entry level range – we have maintained our values… our customers tell us that when they want to save money they don’t want to compromise on values,” King emphasised.
As an example, King revealed that Sainsbury’s first sustainable palm oil product was actually made for its Basics range.
While ethical sales gains have been dented by the recession, King said that as the economic picture brightens, growth is expected to return.
“The trends of growth in areas like Fairtrade and animal husbandry meat has slowed, but we know that it remains important to consumers and we expect growth to return,” he said.
King added that consumer behaviour is picking up as inflation eases. “We can be quite encouraged that we can see consumer behaviour returning,” he commented.
In order to drive top line growth, Sainsbury’s has indicated that it will extend 15-20 stores per annum on an ongoing basis. These expanded outlets will include higher margin non-food assortments, but food will remain a key component to their offering, King said
Additionally, Sainsbury’s plans to open 50 new stores over the next two years, with the aim of expanding its footprint in the north of the country where it only has a 10% market share, compared to its 20% market share in the south.
“We have an opportunity to improve our performance in an under represented area,” King said. “We are very confident that we can do well in that geography.”
The company said that 75% of new stores will be opened in northern areas of the UK.
Sainsbury’s also revealed that the “vast majority” of new stores currently in the pipeline will be superstores of over 25,000 square feet. Meanwhile, King said, “less than 25%” of new stores will be hypermarkets of over 50,000 square feet.
