There may be trouble ahead as Sainsbury's shrinks its bonus pool

The supermarket has enjoyed a bumper year - although the amount it's set aside to reward staff has dropped.

by Emma Haslett
Last Updated: 06 Nov 2012
Sainsbury’s released its annual results this morning, and it looks like the sun was shining on the supermarket all year round, with customer numbers rising to 21m last year, a record high. In fact, not only were like-for-like sales excluding fuel up by 2.3%, but pre-tax profits rose by 12.8% to £827m, and market share also grew, from 16.1% to 16.3%, placing it in a very respectable third place behind Tesco and Asda. So things seem to be ticking along nicely. In which case, why has the supermarket’s bonus pool shrunk?

It wasn’t just in food that things were going swimmingly for Sainsbury’s, it was across the board: not only did sales of books and textiles grow by more than 20%, but DVD sales were also up (in fact, the supermarket accounted for a quarter of all copies of Shrek 4 sold in the run-up to Christmas. That’ll do, donkey, etc).

Its market share in clothing and footwear was also up, from 2.6% to 3.3%, making it the seventh-biggest clothing retailer in the UK. And that’s only set to go rise, given the ever-popular Gok Wan is about to launch a range in their stores. In fact, that sort of thinking probably accounts for the fact that some analysts believe that part of Sainsbury’s increase in market share was down to cash-strapped Waitrose customers trading down…

So it’s slightly perplexing that the supermarket is cutting its bonus pool by a quarter this year, from £80m to £60m. That means its 150,000 employees will receive a measly £400 each (give or take, obviously, depending on rank/number of hours worked) this year, compared with about £530 last year. It also means employee bonuses stand at the same amount they did two years ago – ie. just as the economy was beginning to come out of recession.

So what’s going on? CEO Justin King pointed to squeezes in consumer spending, saying the company is expecting the economic environment to ‘remain uncertain’ over the coming year. So it’s obviously not taking any risks just yet, despite its impressive results. As an aside, it’ll be interesting to see how much King’s own bonus works out at: it was £8m last year. Perhaps half of it will be paid in Nectar Points this year?

Nevertheless, the supermarket added that it’s planning to increase the amount of capacity it sets aside to non-food items to 40%, which should apparently generate one third of its growth in the future. So with any luck, employees will be able to treat themselves to a bit more from the Taste the Difference range this time next year.

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