Sainsburys Profile

Swot - SWOT

Strengths
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Driving affordability - Under the new 'Live Well for Less' banner, Sainsbury's communicates affordability through a sharpened price focus, engaging promotions, innovative marketing, and investment in its comprehensive private label offer. This is being strengthened with the relaunch of standard own brand as By Sainsbury's (to be completed by the end of 2012) which builds on the Taste the Difference relaunch. The nationwide rollout of the 'Brand Match' price refund scheme further builds Sainsbury's value credentials. Values - Sainsbury's effectively leverages its heritage to underpin its food quality credentials. Despite an increased focus on value for money, levers such as ethics, provenance, local sourcing and community initiatives continue to provide Sainsbury's with key points of difference and broad-based customer loyalty. The launch of Sainsbury's new '20 by 20 Sustainability Plan' will further advance the retailer's ethical position. Formats and channels - Sainsbury's convenience store business now delivers annual sales of over 1bn per year, and is a focus for further expansion as part of the retailer's broad based multichannel development programme. Sainsbury's has traditionally been restricted by a more modest non-food offer than Tesco, but recent development of its larger format store estate now supports much stronger growth. Nectar card - Sainsbury's participation in Nectar delivers benefits in terms of consolidating the spend of existing customers, with 17.5m collectors in the scheme in 2010/11, an 800,000 increase over the prior year. Customer data is now being actively used to drive sales benefits for the company. Management team - The senior management team in place under Justin King has a wide breadth of retailing experience and a track record of delivering against targets. This continuity is a particular strength at a time when recently appointed CEOs at key competitors are renewing their management teams.

Weaknesses
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Lack of international presence - in contrast to Tesco and Asda (through Walmart), Sainsbury's does not operate beyond the UK, limiting its scope for growing turnover in what is a relatively mature market. That said, this does help maintain management focus on its core business where there is still much potential for growth, and Sainsbury's has deployed a team to Shanghai to gauge the potential for opening stores in China in the medium to long term. Value positioning - Sainsbury's heritage in quality often leads consumers to perceive it to be more expensive than its main superstore rivals. However, the rollout of 'Brand Match', the expansion of its 'Basics' range of products, its 'Switch & Save' campaign, price lowering initiatives, multi-buy promotions and coupons have helped to drive a stronger value message. Nonetheless, with consumers continuing to feel the squeeze from high inflation, Sainsbury's needs to continue to reassure shoppers of its value credentials. Store portfolio - With a limited number of very large stores, the opportunities to display a full non-food business are also limited. However, Sainsbury's new focus on expanding its portfolio of 45,000 sq ft+ stores through extensions and new store openings should resolve this issue over the next few years. Non-food - Despite recent range expansion and development, Sainsbury's non-food offer is less extensive than either Asda or Tesco, with its marketing focus on food somewhat overshadowing the non-food offer.

Opportunities
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UK expansion - Sainsbury's is committed to expanding gross space by 7-8% per year. Much of this new space is being created in Scotland, the South West or Wales where Sainsbury's is under represented, reducing the historic South East bias of its store network. Convenience - Sainsbury's has comprehensive plans in place to develop this business with up to 100 new stores planned per year. With only c.400 stores, there is a significant opportunity to strengthen its position in a key growth sector.

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Non-food - Non-food sales are growing at three times the rate of food, with this momentum being driven by range development and more non-food space. Building on the success of Tu in clothing, general merchandise has considerable scope for further growth as direct sourcing is expanded. Online - Online is an area of high opportunity for Sainsbury's and across its food and non-food customer base. The introduction of 'click and collect' non-food service to most of its stores by year end, a faster rollout than competitors, provides significant opportunity for driving sales. The extension of the service to groceries provides another potential opportunity for growth. International expansion - With a track record of success and a strategy for growth in the UK firmly established, Sainsbury's has a solid platform from which to explore international expansion. The recent establishment of a team in Shanghai illustrates the higher priority now placed on international development. Nectar - Sainsbury's is keen to drive greater benefits from its loyalty card scheme as a point of difference and take customer insight usage to a new level.

Threats
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Economic downturn - While Sainsbury's has successfully negotiated the challenges of low consumer confidence and the fragility of household finances, it must retain a keen value focus at a time of renewed concern about the prospects for the economy. Competitive squeeze - With new CEOs in place at Sainsbury's three key competitors, and all of them committed to developing new growth channels, it will become harder for Sainsbury's to achieve growth, particularly in the prevailing economic environment. Additionally, Waitrose's expansion into convenience and new territories presents a further challenge. New competition in convenience - The fast growth rate of the convenience sector has made in an attractive opportunity to all major multiples, presenting new competition to Sainsbury's - Waitrose sees potential for building a chain of 300 stores by 2020, Morrisons has begun rolling out its own convenience format and The Cooperative is committed to building its convenience estate further. Increasing penetration of other online grocers - With Morrisons planning to enter the online market, Waitrose growing its presence and Ocado expanding its capacity and reach, Sainsbury's faces increased competition for customers online.

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Corporate overview - Strategy overview

Key messages
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Sainsbury's goal is to offer an ever improving quality shopping experience for customers Sainsbury's aims to exceed customer expectations for healthy, safe, fresh and tasty food that makes their lives easier every day Sainsbury's is focused on being 'Best for food and health', committed to 'sourcing with integrity', showing 'respect for the environment', making a positive difference to local communities and being a great place to work Since October 2004, The Making Sainsbury's Great Again, introduced by CEO Justin King has provided the framework which has guided its development

Sainsburys - Company Summary 2011 2010 Group Sales (excl. sales tax) Number of Stores Sales area (sq.m) GBP 21,102.40m 934 1,771,960 2011 GBP 22,152.33m 1,038 1,892,675 % Change 4.98 11.13 6.81

(All data for year to March 2011) Source: Sainsbury's

Strategy
The Making Sainsbury's Great Again programme has five areas of focus.

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Source: Sainsbury's

Five part strategy

Sainsbury's strategy centres on five areas of focus that together constitute the Making Sainsbury's Great Again programme. These are underpinned by Sainsbury's strong heritage and brand.
Goal Progress to date
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Next Steps

Supplier Implications

21m transactions per week (+1m on 2009/10) 'Brand Match' price matching/refund scheme launched 'Live Well for Less' stapline adopted Great Food programme to ensure market leading food and wine offer Distinctive marketing campaigns (e.g. Feed your Family for 50) Six new food colleges opened Taste the Difference relaunch - largest brand
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Great food at fair

Completing relaunch of entire 6,500 SKU mid tier private label under the by Sainsbury's brand by the end of 2012, benchmarking all aspects of products to maximise value for money

Opportunities to work with Sainsbury's to enhance core private label products Scope to market new counter food products

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Sainsburys Profile
prices Increased interest in fair trade / sustainable issues Openness to new marketing initiatives

relaunch completed so far (1,000 SKUs)

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Training for 10,000 staff at new food colleges Investment in food counters and cafes

by Sainsbury's mid tier relaunch - over 3,000 SKUs launched so far Recognition through awards including Meat and Fish Retailer of the Year and Drinks Retailer of the Year 12% of own brand products from certified sustainable sources 25% share of UK Fairtrade market

Non-food sales growing more than three times faster than food sales Tu now the UK's seventh largest clothing brand by volume - big enough to support TV advertising Back to School range now fourth in market Relaunch of Sainsbury's Energy in partnership with British Gas Strong growth at Sainsbury's Bank with pre-tax operating profit up by 50% Financial services expansion through new insurance products and travel money kiosks Transactional Click & Collect app for non-food launched Gok for Tu womenswear collection launched in 200 stores
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Introducing core 15,000 sq ft non-food offer to more stores Increasing maximum nonfood offer to 45,000 sq ft Expansion of GM direct sourcing Merchandising initiatives with key non-food brands
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Accelerating the growth of complementary nonfood ranges

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Stronger non-food offer should build footfall for Sainsbury's stores with a positive impact on food volumes Greater non-food offer will not dilute Sainsbury's core food focus

Convenience sales now over 1bn with over 400 stores open

Target for new business, channels and services to

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Potential for cross selling with service providers New opportunities for foodservice suppliers if Fresh Kitchen rolled out Shift to online may require greater operational flexibility

Online groceries sales growth of 20% 93% of UK households with access to groceries online Click & Collect rollout to over 500 stores by July 2011 Over 1/3 of non-food orders through Click & Collect Fresh Kitchen trial of a food-to-go concept
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deliver 20% of sales (ex fuel) by 2020 1-2 convenience stores to open per week Click & Collect to be available at 800 stores by Christmas 2011 Potential for Fresh Kitchen rollout as standalone or instore concept Click & Collect to be extended to cover groceries

Reaching more customers through additional channels

1.5m sq ft space growth planned for 2011/12 1.25m sq ft of new space per year expected 20/12/13 onwards One third of stores to have significant non-food offer by 2015 Focus on creating more 6070k sq ft stores with full food offer (40-50k sq ft) and compelling non-food offer (20-30k sq ft) Development focus on North and West Potential long term international expansion
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78% of UK population within 15 min drive of Sainsbury's store 21% of UK population within 15 min drive of 15k sq ft non-food offer Space growth of 15.9% in two years to March 2011 ahead of target Establishment of international team in Shanghai

Larger stores offer scope for extended product ranges Focus on North and West set to bring Sainsbury's into new catchments

Growing supermarket space

Created 1.4bn in development value since 2007 through investment and development activity Freehold continues to account for 65% of portfolio Two property joint ventures

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Active property management

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Continued recycling of capital to finance supermarket expansion programme

Strong pipeline of new and refurbished stores creating attractive environments for merchandising products

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Sainsburys Profile

Corporate overview - Key personnel

Plc Board
David Tyler
Justin King

Group Chairman
Chief Executive

John Rogers Mike Coupe

Chief Financial Officer

Group Commercial Director

Operating Board
Justin King Chief Executive

John Rogers Luke Jensen Mike Coupe Gwyn Burr

Tim Fallowfield Roger Burnley Neil Sachdev Rob Fraser Helen Buck Mark Horgan

Chief Financial Officer Group Development Director

Group Commercial Director

Customer Service & Colleague Director

Company Secretary & Corporate Services Director Retail & Logistics Director Property Director IT Director Convenience Director Marketing Director (Appointment announced August 2011, to join by February 2012)

Business Unit Directors

Grocery Fresh & Frozen Clothing General Merchandise Paul Mills-Hicks Simon Twigger James Brown Robbie Feather

Other Senior Contacts

Head of Trading Strategy International Director of Supply Chain Operations Director of Insight & Loyalty Director of Digital Director of Online Director of Property Development Mike Hodgson Kate Whitworth Andrew Mann Tanya Lawler Jon Rudoe Philip Bell-Brown (To join in November 2011)

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Brand Director Director of Corporate Affairs

Judith Batchelar Mark Rigby

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Sainsburys Profile

Corporate overview - Financial results

Latest results - Q2
In the 16 weeks to 1 October 2011, total sales at Sainsbury's grew by 7.8%, with ex-fuel sales rising by 4.4%. Like-forlike sales (ex-fuel) increased by 1.9%, helped by a greater focus on value. During the period, Sainsbury's launched its 'Live Well for Less' customer pledge and continued its by Sainsbury's rollout. Fuel promotions and money off at till coupons, were also influential in boosting value perceptions. In food, both the Basics and Taste the Difference ranges experienced strong growth of around 10%, while in non-food, sales of general merchandise and clothing both grew rapidly. Convenience sales grew at 20%, reflecting the expansion of Sainsbury's convenience store estate by 24 new stores during the period and higher like-for-like growth than supermarkets.

Q1
In the 12 weeks to 11 June 2011, total sales at Sainsbury grew by 7.3%, with ex-fuel sales rising by 4.3%. Like-for-like sales (ex-fuel) rose by 1.9%. Performance during the quarter was lifted by strong demand for Sainsbury's relaunched and rebranded 'by Sainsbury's' core mid tier private label. Sainsbury's Value brand also experienced gains. Sales of general merchandise and clothing outpaced the food business with particularly strong sales of childrenswear. In its convenience business, Sainsbury's grew sales by 20%, supported by good like for growth. This was matched by its online grocery sales, which also increased 20%.

Last full year

Sainsburys 2011 Performance Sales 2010 Sainsburys GBP 21,102.40m Sales 2011 GBP 22,152.33m % change 4.98

Source: IGD Estimates.

Preliminary Results for the 52 weeks ended 19 March 2011 Sainsbury's results for the full year to 19 March 2011, revealed growth in group revenues of 5.7% to 21.1bn, with like-forlike sales (inc VAT, ex fuel) growing 2.3%. Underlying operating profit rose 10.0% to 671m.

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Commenting on the results, Justin King, CEO said: "Sainsbury's has continued to perform well. Customer numbers are at an all-time high of 21 million transactions every week, which is up one million on last year, a clear indication of our growing universal customer appeal across all channels. We have added gross space of 1.5 million sq ft to our store estate, creating over 6,000 new jobs with Sainsbury's. Strong sales growth, combined with productivity savings and tight control on operating costs, have helped to deliver good profit growth."

Progress on key priorities

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Good growth in sales and profits: boosted by a one million increase in customer transactions to 21m and strong progress in Sainsbury's five areas of focus.

Food counter investment: Major investment in food counters through Sainsbury's Great Food programme (including a refreshed offer and the introduction of fresh pizza counters at nearly 140 stores) has strengthened Sainsbury's fresh food credentials.

Largest ever own brand investment: 5,000 new or improved products introduced during the year, including the entire 1,000 strong Taste the Difference range.

Accelerating growth of complementary non-food and services: Non-food sales grew at three times the pace of food with TU becoming the seventh largest clothing brand by volume and strong growth in books and home textiles. Increasing emphasis now on services through Sainsbury's Energy, the expansion of Sainsbury's Bank (especially its insurance products) and travel money kiosks.

Convenience expansion: 47 new stores opened and the trial Fresh Kitchen foodservice concept launched in Central London.

Online progress: annual sales growth of over 20% and weekly orders of over 130,000, with increased contribution from non-food due to rollout of Click & Collect service.

Space growth: 21 new stores and 24 store extensions opened in addition to convenience store openings, equivalent to 1.5m sq ft of gross apace or 8.5% year-on-year growth. The majority of new stores (70%) were opened in areas of the country where Sainsbury's is traditionally under-represented such as Scotland, Wales and the south-west, with Sainsbury's utilising extensions to grow its non-food space in particular in its more core trading regions. Sainsburys - Five Year Review
2008 Sales Total Turnover Growth (%) Number of Stores Sales area (sq.m) Average Store Size (sq.m) GBP 18,911.21m 6.02 792 1,550,896 1,958 2009 GBP 19,963.99m 5.57 872 1,649,201 1,891 2010 GBP 21,102.40m 5.70 934 1,771,960 1,897 2011 GBP 22,152.33m 4.98 1,038 1,892,675 1,823 2012 GBP 23,435.46m 5.79 1,126 2,019,144 1,793

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Sainsburys Profile

Grocery Sales Density GBP/sq.m/wk

234.49

232.79

229.02

225.08

223.20

Source: Sainsbury's, IGD Estimates

Five Year Review - Additional Published Financial Data

2006/07 2007/08 2008/09 2009/10 2010/11 Underlying Operating Profit m Underlying Operating Profit Margin % (Retail) Underlying Profit Before Tax Underlying Profit Before Tax Growth 429 2.54 339 38.9 535 3.00 434 28.0 616 3.26 519 19.6 671 3.36 610 17.5 738 3.50 665 9.0

Source: Sainsbury's

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Sainsburys Profile

Format - Portfolio statistics

Key message
Sainsbury's is committed to expanding the scale of its physical presence through a combination of hypermarket supermarket and convenience store openings, in addition to investment in its multichannel operations
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Europe GBP 22,152.33m (100.00% of sales) 2011 No of Stores 61 525 452 1,038

Market United Kingdom

Format H S C Total

Fascias Sainsbury's Sainsbury's Sainsbury's Local

Sales Area 401,985 sq.m 1,391,250 sq.m 99,440 sq.m 1,892,675 sq.m

Average Sales Area per store 6,590 sq.m 2,650 sq.m 220 sq.m 1,823 sq.m

Sales GBP 2,604.25m GBP 17,626.45m GBP 1,131.07m GBP 21,361.77m

Key to Abbreviations Hypermarket Superstores/Supermarkets Convenience & Forecourt H S C

Sainsbury's exceeded its goal of expanding its gross space by 15% in the two years to March 2011 (with growth of 15.9%) and remains committed to further expansion. While 78% of the population is within a 15 minute drive time of a Sainsbury's store there remain many areas of the country where Sainsbury's has potential to gap fill without cannibalising existing store sales. To remedy the long standing bias in Sainsbury's store network towards southern England, over of 70% of new stores opened in the last two years were opened in Scotland, Wales or the South West. In 2011/12 Sainsbury's intends to continue the momentum in its store opening programme with gross space growth of 8.5% or 1.5m sq ft. Looking further ahead, Sainsbury's will slow its rate of space expansion to c.1.25m sq ft per year. Sainsbury is realising economies of scale in its store expansion programme. Over the last three years standard fit out and build costs have fallen by 15-20% per sq ft and Sainsbury's expects further improvements. Sainsbury's is keen to reduce the environmental impact of its stores. Initiatives include the introduction of rainwater harvesting and biomass boilers, and the use of natural light and energy saving lighting. Sainsbury's Fresh Kitchen trial food-to-go store is an innovative concept format with potential for a wider rollout

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Sainsburys Profile

and inclusion into larger Sainsbury's stores. Click here to access the store visit report.

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