J Sainsbury
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J Sainsbury plc is the parent company of Sainsbury's Supermarkets Ltd, commonly known as Sainsbury's, which is a chain of supermarkets in the United Kingdom. It was once the market leader in the UK supermarket sector, but is currently ranked third behind Tesco and ASDA. The company's fortunes have improved since the launch of a recovery programme by CEO Justin King in 2004 and ASDA CEO Andy Bond has suggested Sainsbury's may regain second position, lost in 2003.
The group has struggled to retain its market share and profit margins since the mid 1990s, and in its latest accounting period to 26 March 2005 it would have made a loss if it had not made a one-off profit on the disposal of it U.S. subsidiary. In 2004 new chief executive Justin King launched a new strategy focused on supply-chain overhaul to tackle stock availability, increased competitiveness on price and improving customer service. In early 2005 Sainsbury's share of the UK grocery market began to increase slightly according to TNS Superpanel. When the company's results were announced in May 2005 King claimed, "We are on track but still in the very early stages of a long-term recovery programme. "[1] (http://news.bbc.co.uk/1/hi/business/4557767.stm).
The company is listed on the London Stock Exchange. The J Sainsbury group also has interests in property and banking.
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History
Sainsbury's was established in 1869 when John James Sainsbury (hence J Sainsbury plc) and his wife Mary Ann opened a store in Drury Lane in Holborn, London. Until 1973 the company was wholly owned by the Sainsbury family, however it was then floated in what was at the time the largest ever flotation on the London Stock Exchange. Today the family retain approximately 35% of the shares.
The group started the Homebase DIY store chain, which it sold in 2000. In 1987 it took over US chain Shaw's Supermarkets. In 2004 it sold the chain to Albertsons Inc. for $2.5 billion.
Store summary
At the end of its 2004/05 financial year Sainsbury's store portfolio was as follows. [2] (http://www.j-sainsbury.co.uk/files/results/prelims05/pres_booklet.pdf)
| Format | Number | Area (ft²) | Area (m²) | Percentage of space |
|---|---|---|---|---|
| Supermarkets | 465 | 15,799,000 | 1,468,000 | 96.5% |
| Convenience stores | 262 | 571,000 | 53,000 | 3.5% |
| Total | 727 | 16,370,000 | 1,521,000 | 100.0% |
Management
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Sainsbury family involvement
Today there is little or no family (see below) involvement in the company, although they do still control approximately 35% of the shares. David Sainsbury's retirement as Chairman in 1998 brought to an end 129 years of management of the group by the Sainsbury family. As a government minister since 1998, his shares are held in a blind trust.
The family shareholding makes the much rumoured takeover of the group all but impossible. This due to the fact that any buyer would have to have the agreement of the Sainsbury family, i.e. to sell their shares. This may be sentimental or for purely financial reasons, The Sunday Times quoted a former director; "What would motivate them? They did not sell when the company was worth £11 billion, so why sell now when it is worth just over £4 billion?"
Peter Davis
Sir Peter Davis replaced Dino Adriano as CEO in March 2000 in what was seen as an attempt to regain market position, if he is judged on that aim then he can be said to have failed. During his term Sainsbury's was demoted to third in the UK grocery market. In his first two years he raised profits above targets, however the decline in performance relative to its competitors would lead the group to make its first ever loss in 2004. Davis also oversaw an almost £3Bn upgrade of stores, distribution and IT equipment, but Davis' successor would later reveal that much of this investment was wasted and he failed in his key goal - improving availability.
Justin King
At the end of March 2004 Davis was promoted to Chairman and was replaced as CEO by Justin King, who joined Sainsbury's from Marks and Spencer plc. King was also previously a managing director at Asda.
In June 2004 Davis was forced to quit in the face of an impending shareholder revolt over his salary and bonuses. Investors were angered by a bonus share award of over £2m despite poor company performance. On July 19 2004 Davis' replacement, Philip Hampton, was appointed. Hampton has previously worked for British Steel, British Gas, BT and Lloyds TSB.
Business review
King ordered a direct mail campaign to 1 million Sainsbury's customers as part of his 6 month business review asking them what they wanted from the company and where the company could improve. This reaffirmed the commentary of retail analysts - the group is not ensuring that shelves are fully stocked, this due to the failure of the IT systems introduced by Peter Davis.
On October 18 2004 all store managers gathered in Birmingham where King unveiled the results of the business review and his plans to revive the company's fortunes. This was made public on 19 October and was generally well received by both the stock market and in the media. Immediate plans include laying off 750 headquarter staff and the recruitment of around 3,000 shopfloor staff to improve the quality of service and the firm's main problem: stock availability. At the same meeting Lawrence Christensen, the newly appointed supply chain director and an expert in logistics, highlighted the reasons for availability issues and his plan to address them. Immediate supply chain improvements include the reactivation of two distribution centres.
Another significant announcement was the halving of the dividend to increase funds available for price cuts and quality.
King has appointed successful industry figures to the company.
- Lawrence Christensen is formerly from Safeway
- Mike Coupe joins as trading director. Previously at Asda and Tesco.
- Gwyn Burr joins as head of customer service. Previously at Asda.
- Ken McMeikan, until joining the company in 2005 as Retail Director was a rising star within Tesco. He has stated that he would not have left that company if he was not convinced that Sainsbury's will be turned around.
Media reports tentative signs of recovery
Since the 2004 business review and the company's first trading report of 2005 King has managed to stem the tide of negative stories in the press. Indeed the press received by the company has been increasingly positive, The Sunday Times noted an appreciable increase in availability in its "Sainsbury looks in store for a recovery" article on March 6 2005. A similarly upbeat article, Sainsbury's strategy begins to deliver (http://www.guardian.co.uk/business/story/0,3604,1434119,00.html) appeared in The Guardian on March 10 2005. The stories did note however that Peter Davis seized on similarly upbeat trading figures early in his tenure, but ultimately failed to improve the company's fortunes.
Financial performance
| Year ended | Turnover (£m) | Profit before tax (£m) | Net profit (£m) | Basic eps (p) |
|---|---|---|---|---|
| 26 Mar 2005 (1) | 15,409 | 15 | 61 | 3.5 |
| 37 Mar 2004 (1) | 17,141 | 610 | 396 | 20.7 |
| 29 Mar 2003 (1) | 17,079 | 667 | 454 | 23.7 |
| 30 Mar 2002 (1) | 17,162 | 571 | 364 | 19.1 |
| 31 Mar 2001 (1) | 17,244 | 437 | 276 | 14.5 |
| 1 Apr 2000 (1) | 16,271 | 509 | 349 | 18.3 |
| 3 Apr 1999 (2) | 16,433 | 888 | 598 | 31.4 |
| 7 Mar 1998 (1) | 14,500 | 719 | 487 | 26.1 |
| 8 Mar 1997 (1) | 13,395 | 609 | 403 | 22.0 |
| 9 Mar 1996 (1) | 12,672 | 712 | 488 | 26.8 |
| 11 Mar 1995 (1) | 11,357 | 809 | 536 | 29.8 |
| 12 Mar 1994 (1) | 10,583 | 369 | 142 | 8.0 |
| 13 Mar 1993 (1) | 9,686 | 733 | 503 | 28.5 |
| 14 Mar 1992 (1) | 8,696 | 628 | 438 | 25.7 |
| 16 Mar 1991 (1) | 7,813 | 518 | 355 | 23.6 |
| 17 Mar 1990 (1) | 6,930 | 451 | 314 | 20.8 |
(1) denotes 52 weeks, (2) denotes 56 weeks.
Sainsbury's Supermarkets
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Sainsbury's Supermarkets Ltd. was established as a separate subsidiary of the group in March 1997 and remains the most significant part of J Sainsbury plc, despite diversification over the group's history. Sainsbury's was for decades the premier supermarket in the UK, it lost this position however in 1995 to Tesco, further slipping to No.3 in 2003 behind Walmart-owned Asda. The supermarket chain has yet to recover from this, with profits and sales growth consistently below that of its main rivals. In 2003 it had a turnover of 18,144 million pounds, and a profit of 695 million pounds. It employed around 150,000 people.
In 2003 Wm Morrison Supermarkets made an offer for the Safeway group, prompting a bidding war between the major supermarkets. The Trade and Industry Secretary, Patricia Hewitt, referred the various bids to the Competition Commission which reported its findings on September 26th. The Commission found that all bids, with the exception of Morrisons, would "operate against the public interest". As part of the approval Morrisons was to dispose of 53 of the combined group's stores. In May 2004 Sainsbury's announced that it would acquire 14 of these stores, 13 Safeway stores and 1 Morrison outlet located primarily in the Midlands and the north of England. The first of these new stores opened in August 2004.
Sainsbury's use NCR checkout or Point of Sale equipment, operating Retalix "Storeline" software. Sainsbury's is a founding member of the Nectar loyalty card scheme, which was launched in autumn 2002 in conjunction with Debenhams, Barclaycard and BP.
Sainsbury's Bank
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In 1997 Sainsbury's Bank was established - a joint venture between J Sainsbury plc. and the Bank of Scotland.
Services offered include car, life, home, pet and travel insurance as well as health cover, loans, credit cards, savings accounts and ISAs.
Property
J Sainsbury's property interests are large, with a separate company within the group responsible for managing the company's existing property assets and the development of new ones (including new stores and other commercial properties).
Sainsbury family
Several members of the Sainsbury family have been prominent in British public life:
- John James Sainsbury (married Mary Ann Stables)
- Alan John Sainsbury (1902-1998), son of John's son John Benjamin Sainsbury, a life peer 1962 as Lord Sainsbury
- John David Sainsbury (1927-), a Tory life peer (Baron Sainsbury of Preston Candover)
- Timothy Sainsbury, former Tory minister, married to Lady Sainsbury (1932-)
- Jamie Sainsbury
- Alexander Sainsbury, son of Timothy
- Jessica Sainsbury
- Camilla Sainsbury, daughter of Timothy, married to Shaun Woodward
- Simon Sainsbury
- Robert Sainsbury (1907-2000), son of John Benjamin Sainsbury, who along with his wife Lisa began the collection of modern and tribal art housed at the Sainsbury Centre for Visual Arts, Norwich
- David Sainsbury (1940-), Labour life peer (Baron Sainsbury of Turville)
- Alan John Sainsbury (1902-1998), son of John's son John Benjamin Sainsbury, a life peer 1962 as Lord Sainsbury
See also
External links
- J Sainsbury supermarket chain website (http://www.sainsburys.co.uk/)
- J Sainsbury plc corporate website (http://www.j-sainsbury.co.uk/)
- Sainsbury warns on profit as it checks out of U.S. (http://uk.biz.yahoo.com/040326/80/epk5d.html); Reuters; 26 March 2004.
- BBC News (17/11/04): Sainsbury's makes first ever loss (http://news.bbc.co.uk/1/hi/business/4018407.stm)
- BBC News (24/03/05): Improved supply lifts Sainsbury's (http://news.bbc.co.uk/1/hi/business/4378035.stm)