Comment: What to expect from Sainsbury’s strategic review

Hot on the heels of Netto’s touchdown again in the UK Sainsbury’s, a joint venture partner of the Danish discounter, will update next week.

Attention, aside from the numbers, is likely to be on the strategic update from new chief executive Mike Coupe.

News of the strategic review hit the grocer’s share price last month because of fears that the dividend could be under threat.

But the ultimate future of the dividend will rely upon the soundness of retail strategy and that is where the real interest will lie next week.

There has already been action on various fronts during Coupe’s tenure.

As well as the Netto tie-up JS has modified its Brand Match scheme specifically to target Asda on value for money, made changes to its Nectar loyalty programme and slashed prices to cut through the promotional noise that can bamboozle shoppers and create mistrust.

The initiatives undertaken so far probably give a strong hint of the strategic direction Sainsbury’s will take over the longer term.

Coupe may be new to his role, but he is not new to Sainsbury’s.

So expect the grocer to find ways to reaffirm some traditional strengths, such as its reputation for product quality and service.

But expect JS also to adapt more rapidly in order to navigate the whirlpool of the food retail market, which has already sucked rivals Morrisons and Tesco into its vortex.

Sainsbury’s sees routes to market such as discount formats and c-stores as distinct retail channels which must serve customers in particular and relevant ways.

By building a presence in the value market through the Netto deal and extending its convenience reach it can take advantage of shopping trends by catering for differing shopper needs.

The same approach should theoretically also allow it to position its supermarkets to fulfil a distinct and still relevant purpose, although that is likely to be a tougher challenge despite JS having fewer of the giant stores that are now a millstone around Tesco’s neck.  

And layered over the top will be an online offer - essential even though small scale in the bigger Sainsbury’s picture.

When Sainsbury’s last updated in October quarterly like-for-likes were down.

The deflationary environment was blamed but it was evidence that JS too was coming under pressure amid grocery market turmoil.

Next week Coupe will hang his hat on a preferred way forward. He has ammo but his aim must be sure.