Analysis: Where next for Sainsbury’s under new boss Roberts?

The promotion means that Roberts, who will take up the post in June, is the second Boots alumnus to be named leader of one of Britain’s biggest supermarkets as Ken Murphy prepares to replace Tesco boss Dave Lewis this summer. 

Roberts joined Sainsbury’s in May 2017 after 14 years at Boots, where he held a dual role as executive vice-president of Walgreens Boots Alliance and president of Boots’ 2,400-store UK and Ireland business.

Shopfloor to boardroom

His big retail roles represent an impressive climb through the ranks for Roberts, who started off on the shopfloor at M&S more than 30 years ago.

His experience means that he knows stores well and is extremely customer- and colleague-centric.

A source close to Sainsbury’s says: “He cares a lot about customers and colleagues. They love him in stores and people have been really pleased with his appointment. Simon was straight back out into stores this afternoon.”

Roberts also knows how to get the best out of stores from an operational perspective.

In his current role, he has been charged with adapting Sainsbury’s stores to the changing way consumers shop, including the introduction of concessions to use space more effectively.

As well as opening shop-in-shops for its own Argos brand, Sainsbury’s has brought in a variety of concessionaires from Oasis and Fat Face in fashion, to Sushi Gourmet and Patisserie Valerie in food. Roberts has also helped revamp categories such as health and beauty in-store.

Roberts believes partnerships are crucial in retail right now. He told Retail Week in 2018: “This industry is being redefined by the partnerships that are happening. There is lots of evidence of the work that Mike and the team have done to really lead the way in creating those partnerships – Argos being the best example.”

Lacking grocery expertise?

Despite Roberts’ wealth of store experience, Shore Capital analyst Clive Black points out that he lacks vital commercial grocery expertise, which means he will need support from the team below him.

Black observes: “He’s experienced at mass-market consumer retailing and shops, and has experience of private label and proprietary brands, but he’s not commercial.

“That’s going to be a big area for Simon Roberts to focus upon and he’s going to have to draw upon his team in a way that Mike Coupe, [Morrisons boss] Dave Potts and [Asda chief] Roger Burnley don’t.”

“Simon will need support in grocery and commercial, which remains far and away the most important part of Sainsbury’s, Tesco, Asda and Morrisons. It is the footfall driver and it is the heartbeat of these businesses.”

Black says maintaining the support of Paul Mills-Hicks, Sainsbury’s commercial director who was also thought to be in the running for the chief executive role, will be critical to Roberts’ success.

“How Paul takes Simon’s appointment is very important,” says Black.

Roberts’ considerable people skills should help him gain the support of key lieutenants.

One former colleague says: “He’s a very good people person, so I think he can win hearts and minds.”

One source close to the grocer agrees: “He has a very strong moral compass and wants to do the right thing for Sainsbury’s and its people, but he is not afraid of making the big decisions. He is enthusiastic and energetic and you need that when a business is going through times of huge change.”

Times of transformation

That change is evident from yesterday’s revelation that Sainsbury’s is to shed hundreds of jobs across functions such as commercial, retail, finance, digital technology and HR in a bid to slash costs and drive synergies with Argos.

The initiative came four months after Sainsbury’s bosses told investors at its capital markets day that it is seeking a further £500m of cost savings over the next five years.

In a note to staff yesterday, seen by Retail Week, Coupe said: “We have to adapt to continue to meet the needs of our customers now and in the future and, while change can be hard, it’s also necessary.

“We have a clear purpose and a strong and compelling set of priorities that will support us to deliver for our customers. We already have a sense of momentum across the business and can accelerate this by streamlining our structure and responding to customer needs more quickly.

“Truly integrating our business also unlocks efficiencies that we can reinvest in the things that matter most to our customers.”

However, one former grocer questions whether this cost-cutting will actually benefit the customer.

He says: “This is dressed up as putting the business closer to customers and making it more efficient, but they are pushing the business further and further away from customers. In a changing and challenging structure, how does Simon make sure they actually deliver on the customer agenda?”

Black points out that Sainsbury’s stores were hit last year after a previous round of redundancies. He says more store managers took the option of redundancy than anticipated and that led to standards dropping.

“There was a real wobble in terms of store operations, which took some time to settle down,” he says.

One ex-grocer says that boosting staff morale needs to be a priority for Roberts.“Top of Simon’s agenda needs to be a hearts-and-minds reboot, given the number of restructures it has had in the past few years. This needs to be a new beginning for them, but that will be really challenging for him given that he’s a member of the incumbent management team.”

What sort of business is Roberts inheriting?

Roberts takes over a Sainsbury’s that is dramatically different to the one Coupe inherited six years ago.

Over his tenure, Coupe focused on building Sainsbury’s general merchandise and digital businesses, and the acquisition of Argos was critical to that aim.

PwC director of retail strategy Kien Tan says: “A lot of the legacy will be around the failed Asda merger, but don’t forget the Argos success. Nobody thought it would be quite the success it was.”

“It has used store space well and has benefited from synergies, but more importantly they’ve chosen their own growth path.

“That’s good as there’s not enough space for the big four to simply all be good at grocery.”

Black surmises: “Mike Coupe has left Sainsbury’s in better shape than he found it.”

He agrees that buying Argos has proved a canny move. “Strategically Mike has smelt the coffee in respect of general merchandising. The challenge of online and what that means for the relevance of stores and shopping centres was on the money.

“His strategic thinking of bringing Argos off the high street and into Sainsbury’s was good. It was good deal-making and execution.”

Despite recent troubles in categories such as toys and electricals, which hit Sainsbury’s sales at Christmas, Black says Coupe “deserves credit” for making Sainsbury’s a non-food destination.

Tan says Roberts has been given “a good blank canvas to grow” market share in non-food. That is valuable in the light of Sainsbury’s and Asda’s crushed merger hopes and food competition, observes Tan.

He says: ”The CMA has put its stake in the sand. You know you’re not going to get growth through consolidation – what else do you do?”

Food problems

However, PwC consumer markets leader Lisa Hooker questions whether Sainsbury’s core food offer has been faring quite so well.

“I wonder if they have taken their eye off food. It needs to invest in its core grocery proposition and think about pricing and product innovation,” she says.

Hooker says Roberts will need to do more to adapt to how people are consuming food differently. She points to Tesco’s merger with Booker, which guaranteed it more “share of stomach”, by growing its wholesale business.

She says Sainsbury’s could benefit from doing something more radical, perhaps extending its small trial with Deliveroo, which delivers pizzas made in selected stores to shoppers.

Missed opportunity?

Roberts is not expected to make any dramatic departure from Coupe’s strategy. Black says: “We would expect Mr Roberts to represent strategic continuity for the foreseeable future, no doubt weaving his personality into the business over time.”

One Sainsbury’s insider said staff were not expecting a strategic upheaval because Roberts was already “heavily involved in shaping the strategy”.

However, the ex-grocer wonders if Sainsbury’s has missed an opportunity by not hiring someone external.

He says: “The thing I worry about with Sainsbury’s is that they have had continuity of management for a couple of decades. That has its advantages, of course, but if you look at what has rebooted Tesco, Morrisons and, to a certain extent, Asda over the past few years, the addition of fresh blood in their leadership has brought fresh energy and fresh thinking. In that respect, it feels as though Sainsbury’s have missed an opportunity.”

Bernstein analyst Bruno Monteyne agrees: ”An external person might find it easier to challenge the current way of thinking within the company and bring in a new view on how customers perceive it.”

Black points out that Roberts has limited capex to invest and will need to “sweat its assets” to grow.

“Sainsbury’s doesn’t have a lot of room to manoeuvre in terms of opening new stores as it has an aspiration to reduce its debt. To hold and build trade, it has to sweat its existing stores and websites effectively. Its peers are finding it’s not easy to grow a retail business without the oxygen of new space. But that’s what it has to do.”

That is no mean feat, but Roberts has been grappling with reinventing Sainsbury’s stores while trimming its cost base for the past two and a half years.

And as he told Retail Week in 2018: “Whether it’s labour, waste, online operations, supply chain, use of space – we’ve got to challenge all those things to find ways of creating more competitive prices and better products. That’s the job of being a shopkeeper.”

And that’s certainly what Sainsbury’s will have at the helm in new boss Roberts.