Bryan Roberts, retail insights director, Kantar Retail: 

On the face of it, this is a gloomy update amidst an increasingly difficult market: a further deterioration in trading for the main store estate, a dip in profitability and fixing the dividend cover. The establishment of a war-chest to fund price investment might help mitigate some advances by the German discounters, but we are fearful that it nullifies only one of the discounters’ advantages: price. 

What it does not address is that the discounters are also winning because they are quick to shop and easy to understand, the latter not a quality immediately apparent in Sainsbury’s recent marketing endeavours. Concerns remain that Sainsbury’s will be first in the firing line when the sleeping giant Tesco reawakens in 2015, adding further pressure to Sainsbury’s already relatively scrawny margins. 

Sainsbury’s has some very clear strengths in areas like quality, service, provenance and instore execution, but playing to these strengths is clearly no longer enough. Sainsbury’s realistic assessment of its store portfolio is refreshing: we await with interest to see next steps on repurposing excess space.


Julie Palmer, retail expert, Begbies Traynor:

Today’s fall in sales and pre-tax profits will come as no surprise to Sainsbury’s investors, who have grown accustomed to disappointing trading from the UK’s largest supermarkets, as they continue to face stiff competition from Lidl and Aldi as well as challenges associated with changing consumer behaviour.

While Sainsbury’s has managed to fare better than Tesco in the reputation stakes so far, today’s announcement predicts like-for-like grocery sales will be negative for years to come, signally yet more downgrades on the horizon.  

As recent results from the Big Four supermarkets have shown, price cuts alone will not suffice in increasing consumer spend. Sainsbury’s will need to practise what it preaches, evolving to meet shopper demands for convenience and quality, if it wants to retain and enhance its current 16 percent grocery market share.

With this being Mike Coupe’s first set of results since taking over from Justin King, now is the ideal time for him to set out his new vision and demonstrate how he can tackle these challenges head on. The recently announced tie up with Danish discount chain, Netto, clearly aimed at targeting shoppers defecting to Aldi and Lidl, shows some foresight from the Board, which is clearly willing to address a changing grocery landscape. Only time will tell if this approach pays off.

At the very least, today’s strategic review should buy at least a six month grace period from Sainsbury’s weary investor base.


David Gray, retail analyst, Planet Retail:

This morning’s numbers underline the extent to which Sainsbury’s competitive position has deteriorated sharply in a market undergoing seismic structural shifts. The twin threats of falling or flat industry food volumes alongside the seemingly unstoppable growth of the hard discounters are now hitting the company performance hard.

In light of sharp declines in like-for-like sales and profits, Sainsbury’s has taken drastic measures. In a case of ‘know thine enemy’, it has joined the discounters with the opening of a first Netto store in Leeds, in partnership with Danish operator Dansk Supermarked. Although allowing Sainsbury’s to tap into the UK’s fastest-growing bricks and mortar grocery channel, further investment beyond the £12.5 million already pledged will be needed at a time when cash is proving increasingly hard to come by.

Although prudent to reduce capex, funded predominantly through a slowdown in big-box openings, Sainsbury’s must be careful not to neglect its core hypermarket & superstore format – which still accounts for the lion’s share of its sales and profits. This core format generates almost 80% of Sainsbury’s sales and probably a higher proportion of profits.

By contrast, the ‘sexier’ and apparently burgeoning channels of convenience and online account for just 7% and 4% of company sales respectively. Both will undoubtedly grow strongly – but even so, by 2018 we’re looking at a sales share of 11% for convenience and 5-6% for online. Big increases, yes, but still small relative to the critical big-box channel. Sainsbury’s must therefore continue to give its largest channel the attention it deserves.”


Phil Dorrell, director, Retail Remedy:

For Sainsbury’s to blithely describe a £290m annual loss as ‘relative outperformance’ shows just what dire straits the supermarket giants face. Put another way, Sainsbury’s results are marginally less awful than Tesco’s.

But at least they will have come as little surprise to the already battle-hardened Mike Coupe. He inherited the crown as the brand’s sales and profits were on the turn, and so far he has provided mitigation if not miracles.

There is no existential crisis at Sainsbury’s, but its once distinctive “Price Match’ pledge has lost its edge as it bleeds sales to the discounters and the price-cutting efforts at Asda and Morrisons.

The joint venture with Netto is a canny move to reclaim a chunk of the discounters’ market, and the new store in Leeds, the first of 15, will trade well. But this is really just small beer, and if Sainsbury’s fails to get its marketing right and make its pricing more convincing, it can only expect to lose more market share across its main estate.

Sainsbury’s ‘one notch up’ positioning does offer it a chance to gain ground over Christmas - where people often trade up, away from the discounters.

But with rivals that have a stronger online presence likely to steal a march on it in Christmas gift shopping, Coupe needs to bring out the big guns out this December and make a statement of intent for next year’s trading.

Ringing in his ears will be the retailer’s maxim - keep the customer for Christmas and you’ll keep them until Easter.”


John Ibbotson, director, Retail Vision:

Just like the old British empire, the Big Four are now in an irreversible decline. For Sainsbury’s, like the others, the challenge now is to manage that decline and to at least stay in the game.

£150m of price cuts is peanuts compared to the amounts Asda, Tesco and Morrisons have put aside. However, Mike Coupe, and Sainsbury’s, know that they can’t compete on prices and so they have to play a longer game. 

Multi-channel, product quality and brand strength are the future and supermarkets that focus purely on price could be fighting the wrong battle.

Mike Coupe is certainly honest about the unique challenges the supermarkets are facing at present, and this is a good place to start. It’s all change and for those that don’t change, it will be curtains.

The middle classes are on the move, and their destination is Aldi and Lidl. Does Sainsbury’s have the market savvy to stop the grand exodus, and retain a core customer? 

The upheaval will go on for years, and the low cost discounters look set to be the main winners. The only limit is how many stores they can open. To make matters worse for the Big Four, the discounters have really upped their game from a brand perspective. You’d think the new Lidl TV ads belonged to M&S or Harrods.

The tie-up with Netto is a shrewd move, but Coupe will need a lot of Nettos to make up for recent sales drops and he may lose some Sainsbury’s customers along the way. For the Big Four, the party is well and truly over.


Jon Copestake, retail analyst, The Economist Intelligence Unit

Sainsbury’s interim figures paint a depressingly familiar picture for all of the big mainstream retailers in the UK. Shrinking like-for-like sales, the £287m store write down and £290m loss highlight the ongoing challenge from discount retailers. Neither is the outlook any rosier. The announcement of £150m in price cuts and mothballing of new stores hints at a desire to consolidate rather than expand until the current storm passes. While Sainbury’s achieved years of consecutive growth under former CEO Justin King, the current boss Mike Coupe is warning of shrinking like for like sales for years to come.

Sainsbury’s is far from alone, with Tesco’s high profile accounting problems and Morrison’s also struggling. The situation will no doubt be exacerbated by Aldi’s recently announced ambitious expansion plans. The highly competitive UK market is likely to become even more cut throat in coming years with customers set to benefit from shrinking margins even as retailers suffer.


Matt Woodhams, director, Added Value

This doesn’t represent a game changing move – this kind of “investment” in price will help Sainsbury’s maintain a position in the market. It doesn’t represent any kind of breakthrough platform to drive growth for the brand – but that’s not their ambition as the business is clearly hunkering down for a period of driving results through savings rather than top line growth. This isn’t a sustainable approach over the long term but it will make Sainsbury’s leaner and more fit for purpose in an environment where shoppers have significantly altered their expectations and behaviours over recent years.


David Stoddart, analyst, Edison Investment Research

Intensified competition in the grocery industry hit sales and margins leading to lower underlying profits, and the Group reported a loss being after impairment and other charges. The balance sheet, which did not give cause for concern when retail profitability appeared secure, now shows signs of strain. Partly to address that issue and partly to reflect structural changes in the food retail industry, Sainsbury is cutting capex. The dividend based on cover of two times earnings will reduce as profits will fall this year.

Sainsbury is well-positioned in convenience retailing, continues to make progress in non-food and sees encouraging signs from the bank. However, these pluses are dwarfed in the short term by the scale of the threat to the core food retailing business. That threat might have been exaggerated but is nevertheless significant.