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May 13, 2010

On the money: Sainsbury’s food focus drives growth

Sainsbury's has insisted that its focus on delivering high quality, good value food products remains “at the heart” of its ability to drive long-term growth at the business.

Sainsbury’s has insisted that its focus on delivering high quality, good value food products remains “at the heart” of its ability to drive long-term growth at the business.

Earlier this morning (13 May), the company posted a 6.7% jump in full year sales and revealed that post-tax profits rose 8.9%.

Speaking during a results presentation with analysts, chief executive Justin King emphasised that, over the last five years, the company’s cumulative like-for-like revenue growth totalled 25%.

This turnaround, King said, had been achieved through the supermarket group’s focus on expanding its appeal by improving its product range, own label offering, price positioning and promotional participation.

“The work that we have done with our range really delivers universal appeal. It has allowed us to compete in a downturn in a way that many thought was not possible. And we have maintained a very sharp price position,” he commented.

While Sainsbury’s promotional participation reached the “historical high” of 33% in the fiscal, King said that promotions had been “targeted” through such campaigns as coupons at till. Combining this with Nectar card information, King said the group had been able to deliver “real value” to loyal consumers, keeping its promotional levels below the 37% industry average.

Sainsbury’s trading director Mike Cooper added that the company’s sustained growth was built on the foundation of its core food offering.

“Food is at the heart of what we do,” Cooper reiterated. “We know our foods taste better. We don’t just think it, we know it because we constantly test our food against the market leaders and the own label equivalents and branded equivalents in the market place. So if you take the top 250 brands as an example we know our products are at least at parity or better than the leading brands and of course they are 20% or more cheaper – which offers better value.”

King said that by offering quality and value to UK consumers the group had been able to grow during the recession.

While King said that trading conditions looked set to remain “tough” in the coming year, he added that sales and earnings would continue to grow as the company invested in expanding store space.

Management revealed that the company plans to increase its selling space by 8% year-on-year. This will include the opening of around 20 new supermarkets and 75-100 convenience outlets.

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