City gives thumbs up to Sainsbury's revamp

THE STOCK MARKET gave a cautious welcome to the latest shake-up at Sainsbury's yesterday as the struggling supermarket group announced a fresh package of measures designed to kick-start its flagging sales and narrow the gap with Tesco.

Sainsbury's shares edged 8.5p ahead to 388.75p as analysts welcomed management's honesty in admitting their past mistakes.

However, most supermarket experts said that the current management team would have to deliver on its promises this time or risk calls for changes.

Paul Smiddy, food retail analyst at Credit Lyonnais, said: "Everything they have said is sensible but we have had a lot of false dawns with this company before.

"They are re-launching the brand at a time when I am not sure the retail basics are strong enough to take it."

Phillip Dorgan at WestLB Panmure added: "They are basically trying to copy Tesco and there is nothing wrong with that.

"At least there is an element of humility there with the management prepared to admit to past mistakes."

Analysts were responding to a series of astonishing admissions by the Sainsbury's board. Dino Adriano, chief executive, said three quarters of the group's 413 supermarkets are "not up to scratch".

He said basic retailing basics had been ignored, with many stores deprived of investment for too long, resulting in too many shabby outlets with "clapped-out equipment".

He conceded that the group's customer service could be austere and that the company's culture would have to change.

"The performance of Sainsbury's supermarkets is not acceptable," he said.

To address the failings, Sainsbury's is implementing one of the biggest corporate overhauls in its 130-year history. Some 1,100 store management jobs have been cut to reduce costs and improve efficiency. These are in addition to the 230 jobs cut at the Savacentre headquarters and the 300 redundancies at Sainsbury's head office.

The rationalisation will yield a total of pounds 160m of cost savings and give the company the headroom to invest more in an improved service on the shopfloor.

The plan includes increased investment in the stores, expanding 40 per cent of the outlets and a 24 per cent increase over two years in non-food lines such as clothing, cookery products and health and beauty ranges. The changes will be backed by a new advertising campaign and new-look stores and uniforms.

There is a change in the boardroom, too, with Sir Tim Sainsbury stepping down as a non-executive director of the group.

The departure severs the company's remaining boardroom link with the founding family which still controls 35 per cent of the shares.

In an attempt to deliver better returns for long-suffering shareholders, Sainsbury's has also introduced a new "Managing for Value" campaign with the goal of taking Sainsbury's into the top quartile of its peer group within four to five years.

"It is not too late for us to change," said Mr Adriano. "I personally think, we will get it right this time."

The comments came as Sainsbury's unveiled a 3.8 per cent increase in full-year profits to pounds 756m, before exceptional items. Like-for-like sales rose by 2.2 per cent on last year but are thought to have slipped into negative territory in recent weeks.

Sainsbury's has pledged to restore sales growth by year end and beat the industry average by next financial year.

Outlook, page 19

Start your day with The Independent, sign up for daily news emails
News
Howard Marks has been diagnosed with inoperable cancer, he has announced
people
Arts and Entertainment
Benedict Cumberbatch has spoken about the lack of opportunities for black British actors in the UK
film
Voices
Winston Churchill, then prime minister, outside No 10 in June 1943
voicesA C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
News
Rowan Atkinson at the wheel of his McLaren F1 GTR sports car
people
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Recruitment Genius: Outbound Sales Executive - OTE £25,000

£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Day In a Page

Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project
Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

Diana Krall interview

The jazz singer on being friends with Elton John, outer space and skiing in Dubai
Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

Pinstriped for action

A glimpse of what the very rich man will be wearing this winter
Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

Russell T Davies & Ben Cook: How we met

'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Bill Granger recipes: Our chef serves up his favourite Japanese dishes

Bill Granger's Japanese recipes

Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
Michael Calvin: How we need more Eric Cantonas to knock some sense into us

Michael Calvin's Last Word

How we need more Eric Cantonas to knock some sense into us