Sainsburys to refocus on food amid 3,500 Argos & counter job cuts

Sainsbury's has published a strategy update with news that 3,500 jobs are at risk, and interim results for the 28 weeks ended 19 September 2020.

The job cuts come with the closure all the supermarket chain's meat, fish and deli counters and 420 Argos outlets. The counter clsoures are in response to lower customer demand and a desire to reduce food waste.

The 420 standalone Argos stores will close by March 2024, although Sainsbury's said it would open 150 Argos outlets in its supermarkets.

The interim results show that Total Retail sales were up 7.1% (excluding fuel) with like-for-like sales up 6.9%. Grocery sales rose by 8.2% and General Merchandise sales were up 7.4%.

Digital sales increased by 117% to £5.8bn, nearly 40% of total sales and Groceries Online sales up 102%.

Losses before tax stood at £137m, reflecting £438m of one-off costs associated with Argos store closures and other strategic and market changes.

The company's underlying profit before tax came to £301m.

Retail costs came to approximately £290m to protect customers and colleagues from COVID-19, partially offset by £230m business rates relief.

Strategy update
The company stated that it will be refocusing on its core food business, putting food back at the heart. It will:
> Lower food prices, focusing on offering customers consistently good value
> Accelerate food innovation, tripling the number of new products it launches each year
> Profitably grow Groceries Online sales to meet further demand
> Increase the rate of new Convenience store and Neighbourhood Hub openings over the next three years
> Continue to reduce plastic and food waste and inspire customers to eat healthier products, which will be better for the climate and environment, as we work towards becoming Net Zero by 2040
> Close its meat, fish and deli counters, based on reduced customer demand. This will make stores simpler to run and reduce food waste. It will keep adding more quality and innovation in our aisles

The firm said it will accelerate the pace of change across its business, simplifying operations, delivering structural cost savings to support investment into its core food offer and driving an inflection in profit momentum.

> It will transform its approach to costs across the business, delivering a reduction in our retail operating costs to sales ratio of at least two percentage points by March 2024
> This will create at least £600m of annual additional funding by March 2024 to reinvest in the customer offer and deliver improved financial returns. This will be after driving efficiencies to cover inflationary cost pressures, volume-related cost increases and the cost of meeting increasing customer demand for online groceries
> It is investing in the integration of its logistics and supply chain network and the accelerated restructuring of the Argos store estate, reducing costs and delivering working capital benefits
> Reflecting it commitments to focus its resources and move faster, it is open to partnering or outsourcing where this efficiently accelerates its plans to improve customer offer.

Simon Roberts, Chief Executive, said, “As we go into lockdown in England for the second time this year and restrictions are in place across the UK, we know our customers and colleagues are feeling anxious and we will do all we can to support them. Our colleagues have done an exceptional job going above and beyond for our customers every day which is why we are giving our frontline colleagues a second 10 per cent thank you payment.

'Above all else today, I want to express my heartfelt thanks to every one of my colleagues in our stores, in our depots, and across our store support centres for all your hard work and for your outstanding team effort.

'We also want to support our communities and those in need and are creating a £5 million community fund for local charities and good causes, in addition to the £7 million we donated to Fareshare and Comic Relief earlier this year. We want to do our bit to ensure that no one goes hungry at Christmas and to support those most in need.

“COVID-19 has accelerated a number of shifts in our industry. Investments over recent years in digital and technology have laid the foundations for us to flex and adapt quickly as customers needed to shop differently. Around 19 per cent of our sales were digital this time last year and nearly 40 per cent of our sales are digital today.

“While we are working hard to help feed the nation through the pandemic, we have also spent time thinking about how we deliver for our customers and our shareholders over the longer term.

“We will put food back at the heart of Sainsbury’s. We are already working to make this happen – we have lowered prices on over 1,500 every day grocery products over the past few months and we will do more of this, focusing on the staple products that our customers buy every day. We know that customers are feeling the pinch and we want them to feel confident they will get always get great value, quality and service from Sainsbury’s.

'We will focus on accelerating product innovation and will bring new and exclusive products to our customers much more often. To support our ambition in food, we are accelerating our ambition to structurally reduce our cost base right across the business so we can invest faster back into our core food offer.

“Right here and now I and all the team are focused on supporting and delivering for our customers in the days and weeks ahead.”