7th Feb 2024 11:36
(Alliance News) - J Sainsbury PLC's new strategic blue-print was hailed as 'bold' with a "clear vision" to get customers to spend more money.
On Wednesday, the London-based supermarket promised "enhanced returns for shareholders", including a commitment to a progressive dividend policy and plans for a GBP200 million share buyback, as it set out is 'next level Sainsbury's' strategy.
The food retailer said this would build on the "food first" programme that it launched in November 2020. The new strategy aims to make grocery market volume share gains, while still building on the range offered by general merchandise arm Argos.
Sainsbury's said it will commit to the progressive dividend policy from the start of the next financial year, and the share buyback also will take place over the course of that year.
Funding the payouts, Sainsbury's said it continues to forecast retail free cash flow of at least GBP500 million per year and added on Wednesday that it now expects at least GBP1.6 billion over the next three years.
It will aim for GBP1 billion in cost savings over the three years to financial 2027, expecting to take GBP150 million in one-off costs related to those savings over the next three years.
"Sainsbury's has unveiled bold plans to make the company bigger in the future. There is a clear vision to get customers to spend more money, attract more people to its stores, and drive more traffic to Argos' website, stores and supermarket concessions," said Russ Mould at AJ Bell.
House broker Shore Capital said the medium-term plan is a broad continuation of the direction of travel that Chief Executive Simon Roberts has expedited through his tenure.
The broker said Sainsbury will be prioritising the potential created for ongoing growth in food whilst seeking to build upon the "hard-grafted profit generation" in non-food too.
AJ Bell's Mould agreed. "To Sainsbury's credit, its performance has been good in recent years and there is finally an energy about the business which has been absent for decades".
But he cautioned a new strategy does not guarantee success.
"Its growth plan is not something that is guaranteed to work its magic".
"Achieving the goal is another matter and it will cost money – something the market typically hates," he added.
Mould said that Argos "increasingly feels like an odd fit for Sainsbury's given its new primary focus on food and decision to reallocate space inside its supermarkets".
While the Argos brand has considerable weight in the retail sector it doesn't have frequent shoppers.
Shares in Sainsbury fell 3.6% to 265.60 pence in London on Wednesday.
By Jeremy Cutler, Alliance News reporter
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