LONDON (Reuters) - Sainsbury’s boss Mike Coupe vowed to improve stores, cut prices on daily essentials and invest in online to restore sales growth for Britain’s second largest supermarket group after the humiliation of his failed takeover of rival Asda.
Coupe said Sainsbury’s would evolve, rather than dramatically change, a strategy that is designed to meet changing customer habits - more frequent shopping trips, the demand for more convenience and more shopping online.
The absence of a major revision to margin targets combined with better-than-expected full-year profit helped to send its shares up 3.6 percent by 1030 GMT, reducing the losses this year to 13 percent.
Sainsbury’s $9.5 billion bid to buy the Walmart-owned Asda and surpass market leader Tesco was blocked by Britain’s competition regulator last week, in a public rebuke to Coupe who had orchestrated the deal.
The Competition and Markets Authority (CMA) said the combination of the second and third biggest supermarkets would mean higher prices and must be blocked. Sainsbury’s spent 46 million pounds on the failed deal.
Sainsbury’s had wanted to combine with Asda to boost its scale and buying power so it could better compete with Tesco, the march of fast growing German-owned discounters Aldi and Lidl, and Amazon.
Coupe, 58, is now under pressure to show Sainsbury’s can prosper on its own.
Chief executive since 2014 and well regarded by shareholders before the failed deal, Coupe said he would not quit and was committed to restoring growth. Regulatory filings showed he spent about 230,000 pounds buying 100,000 shares in the company on Wednesday.
“I’m committed to the business, I’ve got the support of the board, the support of shareholders and we’re doing all the things that we need to do in terms of adapting our business to our changing customers’ needs,” he told reporters.
“I’ll still be talking to you in months and years in the future,” he added.
Coupe had made unwanted headlines when he was caught on camera singing: “We’re in the money” shortly after the Asda deal was first announced a year ago.
He has been working with a new chairman since March when Martin Scicluna took up the role.
Sainsbury’s plans to step up capital expenditure in 2019-20 to 550 million pounds, skewed towards its food business, improving more than 400 of its supermarkets and its digital business.
Some 4.7 billion pounds of Sainsbury’s total annual revenue of 32.4 billion pounds now comes from its online businesses.
The group would increase investment in technology to make shopping across Sainsbury’s, general merchandise retailer Argos and Sainsbury’s Bank as quick and convenient as possible.
Coupe also acknowledged Sainsbury’s needed to be more competitive on prices for core commodity products, such as toilet rolls, potatoes and cans of baked beans.
“We can and will invest in making our core commodities more competitive,” he said. “Clearly it will take longer than if the Asda transaction had gone through.”
Sainsbury’s also plans to reduce net debt by at least 600 million pounds over the next three years and would maintain its dividend policy.
“The market had been anticipating materially worse scenarios: price/margin reset, new strategy, possibly new CEO. None of this came to play,” said Bernstein analyst Bruno Monteyne.
The group reported a drop in like-for-like sales of 0.9 percent in the fourth quarter to March 9, but that was not as bad as feared after a decline of 1.1 percent over the Christmas period. They were down 0.2 percent over the full 2018-19 year.
Delivery of synergies from Argos, purchased in 2016, helped underlying pretax profit to rise 7.8 percent to 635 million pounds. The total dividend increased 7.8 percent to 11.0 pence.
The update, as well as monthly industry data, has shown Sainsbury’s to be the weakest performer of Britain’s big four grocers, which also includes fourth-ranked Morrisons.
“If the strategy is the right one, if all is relatively well, except for a few tweaks, why is Sainsbury’s growth lagging its peers for so long?,” asked Monteyne.
Reporting by James Davey and Kate Holton, Editing by Keith Weir