Sainsbury’s needs to shore up the shop - Bottom Line

 
Michael Bow
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Sainsbury’s needs to take the discounters head-on (Source: Getty)
In business, timing is everything, and retail moves faster than most businesses. Justin King, Sainsbury’s ex-kingpin, seems to have grasped this better than most when he sailed off into the sunset earlier this year, just as the storm clouds were gathering over the supermarket.

Under King’s helm, Sainsbury’s reported a 2.1 per cent rise in quarterly like-for-like sales this time last year. Shares were trading 36 per cent higher. Now they are at a six-year low and quarterly retail sales have collapsed by 2.8 per cent.

His era was one of the bloated weekly big shop, tank-like shopping trollies filled to the brim with frozen goods being hauled around chilly aircraft hanger-sized supermarkets.

Now, in the era of low-key new boss Mike Coupe, the trend is different: smaller baskets, more trips to the Sainsbury’s Local, and the elephant in the room: the discounters – Aldi, Lidl and Poundland – stealing Sainsbury’s lunchbox.

Coupe will publish a iconoclastic review of the business next month; analysts predict a dividend cut and potential rights issue. But these may just be sticking plaster solutions.

Instead, Sainsbury’s needs to take the discounters head-on. A joint 15-store venture with discounter Netto later this year is encouraging, but switching its Brand Match scheme from Tesco to Asda, as it did yesterday, rather than moving to a more relevant and imaginative pricing scheme suggests it still thinks with a “big four” mindset.

Coupe yesterday said no one could have seen it coming. But his diagnosis of the problem points to chronic, rather than acute, malaise.

Sainsbury’s must now move swiftly to cure it. Time is of the essence.

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