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May 11, 2011

UPDATE: UK: Sainsbury’s looks “beyond food” for growth

The chief executive of Sainsbury's has said today that he expects some 45% of sales to come from new business initiatives by 2020.

The chief executive of Sainsbury’s has said today (11 May) that he expects some 45% of sales to come from new business channels by 2020.

Justin King said that some 25% of the UK retailer’s business comes from its “beyond food” initiatives, which include online, convenience, non-food and services. He expects these parts of Sainsbury’s business to grow to deliver a further 20 percentage points of the retailer’s sales by 2020.

The announcements came as the retailer booked a 9.4% increase in net profit to reach GBP640m (US$1.05bn) for the year ended 19 March.

King said the retailer is focusing on turning its food stores into “destination stores” with a third of its outlets to have a significant non-food offer by 2015.

Speaking to just-food, King said the retailer is looking to buck the challenges faced by other retailers with hypermarkets by ensuring that Sainsbury’s focus remains on being a “destination food store” and by operating smaller stores averaging at 55,000 sq ft.

“Other retailers have faced problems with their hypermarkets as food has become incidental to their offer. Food has to be the core reason why people come into your store, not a supplementary objective,” he said.

The retailer plans to maintain a strong focus on its food offer even in its larger stores, with 40-50k sq ft to be devoted to food, and 20-30k sq ft devoted to its non-food offer.

The retailer is also focused on developing its convenience offer, with plans to open up to two stores per week.

King conceded that the retailer had not reached its original opening plans, but blamed the slowed expansion on a “lack of a bounce-back in the property sector”.

King also highlighted the strength of Sainsbury’s online operations, saying that online grocery sales grew more than 20% over the year, and that the division is profitable at similar levels to its stores, a shift he attributed to the larger basket size of online shoppers.

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