Struggling UK supermarket group J Sainsbury has revealed the long-awaited results of its business review and outlined plans for a sales-led profit recovery.
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The company plans to grow sales by £2.5bn (US$4.5bn) over three years to the end of 2007/08 and restore its brand proposition of quality food at fair prices.
Sainsbury’s said it plans significant investment of at least £400m to improve its customer offer over the next three years. The company will also recruit 3,000 additional shop workers to improve customer service. The exceptional costs related to the business review are estimated at £550m.
“I am convinced that the new sales-led profit recovery plan is the right approach for Sainsbury’s to deliver long term sustainable performance and profit recovery. The initiatives focus on delivering growth by focusing on our customer proposition,” said chairman Philip Hampton.
The company plans to focus on “everyday quality at appropriate and fair prices”. Its traditional focus on fresh and own label products will be increased. In particular, through sub brands like Taste the Difference and Be Good to Yourself, the company plans to make its premium and health ranges the best available and a significant point of difference from other retailers.
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By GlobalDataStore formats will be simplified to comprise just supermarkets and convenience stores. Sainsbury’s Central and Savacentre stores will become part of the supermarket estate and the Bluebird concept store in London will close in early 2005. Sainsbury’s said 131 of its 461 supermarkets have not received any investment for a number of years. These stores will be refurbished over the next two years.
The company’s convenience division will continue to operate separately to ensure the operation of the company’s 260 convenience stores is not a distraction to the operation of supermarkets. The retailer estimates that convenience store sales will grow by £400m over three years to the end of 2007/08. Where stores have opened too close to each other a number of Sainsbury’s Locals are to close, with employees being transferred to other stores. Seven of the stores to close are in the London area, two in the Midlands and three in Glasgow.
Sainsbury’s admitted that product availability is the number one performance issue for the chain and a significant detractor to recent sales performance. Apart from short-term actions already implemented, longer-term improvements in areas such as supply chain and IT are aimed at improving availability.
In order to reduce the cost of central support services the company plans to axe around 750 roles at its head office by March 2005.
Sainsbury’s also issued its second quarter trading statement for the 16 weeks to 9 October 2004. Total sales rose 4.4%, or 1.5% excluding petrol. Like-for-like sales increased 1.8%, but slid 1.1% excluding petrol.
