J Sainsbury has rarely been out of the news in the last few years and its latest headlines involved the possible takeover by private equity investors of the supermarket chain. US-based private equity consortium CCVC Capital Partners, Blackstone and TPG Capital pulled out in early April after it became clear the Sainsbury’s board would not back their proposed offer. The consortium had offered a bid of £5.82 per share but the Sainsbury family – which still dominates the board – wanted more. The company is just coming to the end of a three-year turnaround plan devised by chief executive Justin King to revive its fortunes after a disastrous couple of years. This included the UK’s largest ever IT in-sourcing project, which was completed last year. IT assets, 470 staff, and third-party contracts from Accenture were brought back in house at a cost of £65 million. The supermarket expects this to be paid back in less than two years, through future cost savings from bringing IT back under its own control. At its last trading statement Sainsbury unveiled its eighth consecutive quarter of like-for-like sales growth, strong Christmas trading – serving over 20 million customers in Christmas week – and growth of around 60 per cent for its online business across the quarter.
King claims this online growth has been driven by customer demand, as the company does not do significant marketing of its online offering. This channel is likely to become critical for all the leading retailers over the next two years, and Sainsbury is currently working on multi-million pound upgrades and changes to online offerings, as this part of the business continues to experience spectacular growth. Although no one will comment publicly on the project, it is thought likely to include a far more interactive web offering, and incorporate Web 2.0 technologies aimed at capitalising on the social networking aspects of the internet. Sainsbury has continued to invest in new stores, with eight small new supermarkets opening in the last quarter alone, and it has carried out significant refurbishments giving it more room for non food lines like clothing, where sales are now up around 50 per cent on the year. Investment analysts have pointed to Sainsbury’s property assets as a major reason for the interest from private equity investors.
Sainsbury is coming to the end of a three-year turnaround plan to revive its fortunes after a disastrous couple of years