Supermarket chain Sainsbury’s said this morning that profits soared nearly 30% to £488m in the year to March 22, on the back of a 6% increase in sales (to £19.3bn). It’s the culmination of CEO Justin King’s three-year turnaround plan for the retailer – and since he’s achieved his main goal of racking up an extra £2.5bn in sales, he’s now in line to receive his maximum bonus of £6.5m.
And few will begrudge him it. After all, as turnaround plans go, King’s done a pretty impressive job. Three years ago, the great British public had fallen out of love with Sainsbury, as the retailer struggled to get decent produce out of its warehouses and onto its shelves in time to meet demand. Since then it’s managed to achieve thirteen successive quarters of growth, a whopping £2.7bn in extra sales (the £2.5bn turned out to be far too easy), and a rejuvenation of its flagging brand. Not a bad few years’ work for King, who said today that Sainsbury’s was now ‘a much better business able to compete and grow in this challenging environment’.
To his credit, he doesn’t even seem to have been knocked off his stride by the constant takeover speculation last year – a consortium of private equity firms and then the Qatar sovereign wealth fund both tried to buy the chain, only to fall at the final hurdle as the credit markets dried up. It’s all gone quiet for the time being, but many analysts reckon the Qataris may come back for another go in the coming months.
Now that his three-year plan is complete, it must be tempting for King to collect his bonus (albeit in shares, spread over two years), put his feet up on his desk and enjoy a nice cigar. But he shows no sign of slowing down – he revealed today that Sainsbury’s next big step is an online non-food venture, due to be launched next year. Nobody seems to know exactly what it’ll be selling, but with £15m of investment earmarked for the project in this year alone, it’s clearly a serious bet.
In the meantime it’s more worried about keeping us piling through the tills, as higher mortgage payments and rising fuel costs start to cramp our shopping style. Like all the big supermarkets, Sainsbury’s is focusing on in-store promotions to keep us buying – and according to King, we’re still quite happy to shell out as long as we’re getting good value. He also thinks the government’s exaggerating food price inflation – he reckons their 7% figure yesterday is significantly over-cooked.
Not that it really matters for King - now that’s he’s earned his bonus, he can stick to Sainsbury’s Taste the Difference range for ever more...