Sainsbury's new chief executive Justin King who took up office this week needs to decide what sort of retailer Sainsbury's is and achieve balance in price versus image before the group loses any more market share.
The store announced last week that like-for-like sales fell 0.2 per cent in the January to March period compared to last year going against City expectation for a small increase after a disappointing winter. The group admitted its bottom line is feeling the strain of intense competition in the marketplace.
But analysts say Sainsbury's is struggling because its strategy is not coherent. "Tesco is a lower priced retailer selling high-quality products," said one analyst. "Asda is a one-stop-shop for all the family at lower prices. But what is JS - a premium retailer like M&S or a quality offering for lower prices like Tesco? It cannot put itself in the one-stop-shop category as its share of non-food is well behind Tesco and Asda. It appears to be moving into an increasingly niche position."
King also appears to be under pressure to do something radical with price," commented an observer. "With produce penetration so high, many of the top-line trends seen in JS are reflected in the category," he said. "Sainsbury's is priced above the market in all categories. This does not take into account the possibility of JS shoppers putting a more expensive offering into the basket, but within produce there is less point of differentiation so it is probably a truer reflection of real higher prices. This is likely to leave the shopper wondering exactly what they are paying extra for."
King is expected to make sweeping changes and the former M&S man is likely to want to bring in his own team in at Sainsbury's, while City talk is of a potential takeover by Philip Green who lost out in the Safeway takeover battle. Sara Weller, Sainsbury's deputy managing director, announced last week she is leaving to join Argos. And speculation has turned to managing director Stuart Mitchell who could be next to go as part of a series of changes planned by King.
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