Despite pre-tax profits climbing by just 0.4% to £479m in the past year, Sainsbury's CEO Justin King has declared its recovery complete and has outlined plans for growth.
The disappointing pre-tax profit figure was put down in part to a £26m fine plus £1m legal expenses racked up over the OFT's milk price-fixing allegations. A £7m cost was attributed to the abortive Delta Two takeover discussions.
Underlying profit before tax was up 28.4% to £488m for the year to 22 March on total sales up 5.8% to £19.3bn. It recorded a 3.9% increase in like-for-like sales, excluding petrol, and King declared himself delighted all targets of the Making Sainsbury's Great Again plan had been met or exceeded. The three-year target for £2.5bn in extra sales had been exceeded in January, said King.
King said Sainsbury's would start selling non-food online from 2009, with clothes, a homeware range called Tu, plus health and beauty products sold alongside groceries. CFO Darren Shapland said overall online sales rose 43% in the past year, with 90,000 orders placed per week. Sainsbury's would be investing £15m this year and £15m in 2009 in its online service, he added.
As financial conditions tightened, King said promotions would still feature strongly, with an emphasis on bogofs. He said manufacturers were "falling over themselves" to fund promotions to stimulate sales. "Suppliers are coming through the door waving chequebooks and wanting to help with promotions," he said. But price was not yet so significant it was overriding other factors: "The idea prices are coming to the fore at the expense of quality, service and ethics is wrong," he added.
King also challenged National Statistics figures this week that put food inflation at 6.6%. He put it closer to 2%. "Real inflation in household budgets is perhaps less than is being reported," he said. "Are consumers less confident? Yes. Are household budgets more stretched? Yes. But we are miles away from anything that could be called a recession."
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