Analysis: Sainsbury’s boss Roberts’ key takeaways on inflation, suppliers and staff pay

Sainsbury’s figures for the 16 weeks to June 25 – showing a 4% drop in like-for-like sales – painted a similar picture to many of its grocery competitors. Sales have softened year-on-year as a result of tough lockdown comparisons, but performance is streaking ahead of pre-pandemic levels.  

However, it is the cost-of-living crisis and the impact of inflation on every part of Sainsbury’s food, clothing and general merchandise business that is dominating Roberts’ thoughts.

Retail Week pulls out the four key takeaways from Sainsbury’s trading update. 

1. Crunch time

The cost-of-living crunch has been dominating the agenda for much of the year, without consumers altering their habits markedly. However, Roberts says Sainsbury’s is now beginning to see evidence of shoppers changing their behaviours as a result of increased costs.

He suggests the grocer’s introduction of its Aldi Price Match initiative – matching the discounter on hundreds of staples – is gaining increasing resonance among its customer base.   

“What we are seeing is some switching into economy own-label,” Roberts says. “That’s the reason why Sainsbury’s Aldi Price Match is playing such an important role, and why we’ve further improved that to make sure it’s focused on the 20 products customers buy most often.” 

During the 16 weeks, Sainsbury’s extended its Aldi Price Match scheme to 240 items – a move Roberts says drove “single-digit growth” in sales of those products.  

Roberts says Sainsbury’s has targeted everyday basket staples when expanding its Aldi Price Match. For example, the proportion of its meat, poultry and fish lines now price matched to Aldi jumped from 8% to 13%. In dairy, it increased from 12% to 15% and in produce, it moved from 15% to 16%. 

Despite customers beginning to feel the pinch at the shelf edge due to rampant food price inflation, Sainsbury’s focus on price helped it grow grocery sales 8.7% during the quarter, compared to pre-pandemic levels. 

2. Argos, we have a problem

At a time when customers are trading down to cheaper alternatives in food, consumer demand for big-ticket general merchandise items is also drying up. As Roberts explains: “The other key point that we’re seeing in general merchandise is that big-ticket items have been more challenged, not surprisingly, but within that period we’ve seen some growth in the other categories.”

Roberts refers in particular to Sainsbury’s own-label clothing and general merchandise offer. However, what he describes as “some growth” across the 16-week period was more akin to sales recovery, as revenues declined year on year. 

As the below slide highlights, Sainsbury’s non-food sales took a sizeable year-on-year hit during the first five weeks of the quarter. But sales recovered in the subsequent 11 weeks as year-on-year comparisons normalised.

Roberts has put food “back at the heart” of the Sainsbury’s business during his tenure, focusing heavily on price and innovation, but this was the fifth straight quarter when
Argos has suffered sales declines. 

Although Argos may not be the top priority for Sainsbury’s at moment, Roberts insists the business remains hugely important for the group. But he admits the general merchandise category is currently facing some existential headwinds. 

“In November 2020, we laid out a plan. The first was a real transformation of the Argos operating model to improve availability and reduce costs,” he says. “We thought about a more challenging GM outlook at that point of time – those were the key things we set course on. 

“As the top line has been under pressure, we’ve been improving both cost and our margin discipline. There were substantial global challenges on availability, particularly in the third quarter last year, and that’s caused an impact on our top-line sales. We saw an improvement in that through the fourth quarter and that trend has continued.”

Roberts says Sainsbury’s is also working to rebalance its broader non-food offer, including Argos, after shutting more standalone Argos stores and moving them into the grocer’s larger supermarkets. The grocer’s own-brand, in-store general merchandise has moved from the front of many stores to aisles, while some categories, such as entertainment, have been removed from supermarkets completely. 

3. Confidence and supply 

Sainsbury’s big-four rival Tesco has made headlines recently after a pricing spat with Heinz led to products like baked beans, ketchup and salad cream being removed from shelves.

Thus far, Sainsbury’s has opted to retain choice for customers, though many Heinz products are now being sold at inflated prices.

“We have really strong and trusted relationships with our supply base”

Simon Roberts, Sainsbury’s

Roberts concedes there is “a lot of pressure in the system at the moment” due to the rising costs of everything from commodities to labour and fuel. However, he insists Sainsbury’s and its suppliers were working hand in hand, rather than butting heads in the manner that Tesco and Heinz have. 

“We have really strong and trusted relationships with our supply base,” he says. “We had a big event last week with all of our suppliers together really sharing our plans and working together on how we’re going to navigate this environment to do the best job we can for customers.” 

Roberts adds that Sainsbury’s values its “strong and important” partnership with British farming. “Given the unprecedented pressures in the system, we’ve been doing everything we can to support them. That’s why we were the first [supermarket] to move on supporting the UK pig industry. We’ve been working very closely with the egg industry and also with dairy farmers,” he says, explaining that Sainsbury’s was reimbursing farmers for the increased production costs they are incurring.  

Perhaps hinting at choppier waters ahead, Roberts concedes that the industry faces “an important, balanced set of choices: keeping prices down for customers and importantly, keeping products in stock for customers”.

4. Money, money, money 

Just 48 hours ahead of Sainsbury’s AGM, which takes place on Thursday, Roberts faced further questions on staff pay and executive remuneration. 

The retailer has come under pressure from a group of investors to pay staff the independently set living wage. A resolution on the matter is set to be voted on at this week’s meeting. 

Sainsbury’s has already raised pay for its 171,000 employees across 1,400 stores to the living wage of at least £9.90 an hour outside London and £11.05 in the capital. “We moved our annual pay timing, when the cost of living issues were really starting to come through,” Roberts says.

“We made changes to pay, investing £100m in holiday pay from the first day of the financial year. Every single one of our colleagues earns at or above the real living wage and we were the first major supermarket to make that move.” 

“It’s a challenging time for our colleagues working on the shop floor, who are doing an amazing job”

Simon Roberts, Sainsbury’s

Roberts faced questions over his executive remuneration package – and is likely to face a grilling at the AGM. Taking account of his salary, bonus and other incentives, Roberts is on course to receive a total package worth £3.8m this year, 183-times more than the average Sainsbury’s employee. 

Roberts defends that remuneration package, explaining how he has worked in retail for more than 30 years and worked his way up from the shop floor to the boardroom. 

But he adds: “It’s very front of my mind every day. It’s a challenging time for our colleagues working on the shop floor, who are doing an amazing job. I spend as much of my time as possible making sure we’re doing everything we can to support them, given everything they’re doing.”

Consumers and colleagues alike will be heartened to hear that the boss of the UK’s second-largest grocer is laser-focused on the cost-of-living crisis. But, with Roberts admitting the situation will get worse before it gets better, Sainsbury’s resolve will be tested in the second half of the year.

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