Sainsbury's interims: Five things to look for in the grocer's update

Full-year profit guidance

At Sainsbury’s second-quarter trading update, boss Mike Coupe confidently predicted that the grocer would report full-year profits “moderately ahead” of expectations.

The supermarket giant reported a growth in sales volumes and the number of transactions during the 16 weeks to September 26, although like-for-like sales dipped 1.1% during the period.

Total retail sales edged up 0.3% as bosses insisted its strategy was “progressing well in a challenging market”.

Coupe will almost certainly use the interim results to deliver further colour around how Sainsbury’s is set to beat City estimates of around £546m and elaborate on exactly how much it could surpass that forecast consensus by.

C-store rebrand?

Sainsbury’s showed off its new supermarket and convenience store concepts to journalists last month, dubbing the latter a “micro” format.

The clutch of new-look c-stores have canned tobacco and lottery ticket sales and reformatted the layout around three core missions: breakfast, lunch and food for tonight.

Product adjacencies reflect the purchase mission rather than a more traditional layout, when items often bought together might be some distance apart.

Sainsbury’s stated that, if the pilot is successful, it could open up to 1,000 of the micro formats. It already has 750 convenience stores operating under the Sainsbury’s Local fascia and the rumour mill suggests the grocer could be seeking a new name to encapsulate its latest c-store innovations.

If that is indeed the case, the interim results statement could be as good a time as any to unveil it.

Progress with partnerships

Sainsbury’s secured a deal to bring Scandinavian discounter Netto back to the UK last June, but since then it’s been a familiar story whenever Coupe has been asked for details on the progress of the partnership.

The supermarket giant is yet to reveal any figures on how its Netto stores have been trading, leaving the City and journalists alike wondering whether the tie-up has been a success or a damp squib.

Coupe continued that trend at Sainsbury’s second quarter update in September, refusing to be drawn on the subject other than to confirm that it would open three more Netto stores “in the next month or so”.

Speaking at the IGD Big Debate event last month, Coupe said Sainsbury’s was “learning a lot” about the discount market and said the partnership had been “so far, so good”, adding that it remained “on track” to have 15 Netto stores in the UK.

But with almost 18 months having passed since the tie-up was unveiled, the Netto venture is sure to come under increasing scrutiny and a more meaningful update could be just around the corner.

Another Sainsbury’s partnership – its tie-up with Chinese ecommerce titan Alibaba – is a much more recent development, with the deal only having been penned this September.

However, Coupe has arguably already been more vocal about this venture than he has been on the Netto deal, although any update on sales has been purely anecdotal to date, with Coupe revealing that “breakfast is big” in China – a fact that has sparked healthy sales of goods including UHT milk, granola and red label tea bags.

More tangible information on sales could be just around the corner – and could potentially prompt Sainsbury’s to expand its current range of 50 SKUs available in China.

Online plans

The online grocery market has become an even more intriguing sector in recent months following a number of developments and an update on online trading is sure to form a key part of Sainsbury’s results.

The retailer’s online boss Robbie Feather claimed at the IGD Online & Digital Summit that UK supermarkets had “destroyed” the value in online grocery by under-charging for fulfilment options.

But that trend seems poised to continue as Amazon prepares to bring its Fresh proposition to the UK, while Tesco is said to have trademarked the ’Tesco Now’ name as it reportedly bids to rival the US etail goliath’s one-hour delivery times.

Coupe has been questioned about the appetite for one-hour delivery times in the past, while Sainsbury’s has also started rolling out click-and-collect sites, and has dropped the price of its annual delivery passes to better compete in the hotly contested market. But could it move again with Amazon and Tesco poised to up the ante once more?

Brand Guarantee riposte

As revealed by Retail Week last month, Sainsbury’s big four rival Tesco ditched its Price Promise in favour of the innovative Brand Guarantee scheme, which gives shoppers instant discounts at the till if their branded shop would have been cheaper at Sainsbury’s, Asda or Morrisons.

The initiative was described by Grocery Insights director Steve Dresser as “Sainsbury’s Brand Match on steroids”, given that the grocer’s existing scheme only compares prices to Asda.

With that in mind, it wouldn’t be beyond the realms of possibility for Sainsbury’s to hit back with a beefier, bulked up price-matching scheme that compares goods against all of the big four.

Coupe has previously reaffirmed his confidence that the supermarket giant has the balance sheet to cope with almost anything the market throws its way and go “toe-to-toe” with its rivals on price.

Sainsbury’s has left Tesco trailing in its wake for years when it comes to price guarantees, but with the latter suddenly leading that market again with Brand Guarantee, don’t expect Coupe to let that lie for too long.