Sainsbury’s top man steps down just as the panic-buying revenues roll in

Mike Coupe is preparing to deliver Sainsbury’s annual results on Thursday, his last presentation to investors as head of Britain’s second biggest supermarket chain. After almost six years at the top, the 59-year-old is retiring on 31 May, and will hand over to Simon Roberts, the group’s retail and operations director.

You wonder how Roberts might be feeling about that. Few could have predicted the challenges facing the retailer, and the country, when Coupe’s departure was announced in January – just as Public Health England was declaring that the risk to the British public from coronavirus was low.

Even for a business that goes back 150 years, Sainsbury’s (and its retail rivals) are dealing with truly historic circumstances, and huge pressure on supply chains. Demand for food in stores and online grocery deliveries has soared as sales of general merchandise and clothing have evaporated among consumers confined to their homes. Sales at food stores rose by more than 10% in March, the strongest showing on record, according to the Office for National Statistics.

Yet Sainsbury’s upcoming results will not show much evidence of that sales boost, given they cover the 12 months to 7 March. It was only in the final fortnight of that period that frantic stockpiling of toilet paper and store-cupboard essentials such as pasta began in the run-up to the government lockdown.

Analysts forecast that Sainsbury’s will have made £584m in underlying profits before tax over the past year – higher than the previous year, when it was hit by one-off costs related to its attempted merger with Walmart-owned Asda.

Sainsbury’s will also tell its investors how it expects trade to be affected by the lockdown. Supermarkets should be enjoying a purple patch, as consumers queue outside stores and flock online to buy groceries.

However, as competitor Tesco noted in its results this month, higher demand is accompanied by higher costs. Sainsbury’s has had to take on “thousands” of new staff and redeploy workers from its catalogue-retail subsidiary Argos to fill its shelves, while ramping up its online service to meet a 75% increase in demand for delivery slots. The supermarket says it is working with the government to prioritise deliveries for the elderly and vulnerable, even those who haven’t previously shopped with Sainsbury’s.

he closure of cafes and restaurants has benefited food retailers, and analysts are optimistic about the outlook for Sainsbury’s share price, although it is currently sitting at about 201p, 14% lower than where it started the year, due to the market turmoil triggered by coronavirus.

Analysts and investors will be closely watching the announcement about the retailer’s dividend. The group will be well aware of the criticism that met Tesco’s decision to pay out £635m to shareholders, having received a similar-sized handout from the government by way of a business rates holiday for the rest of the year.

Since the coronavirus crisis began, Coupe has become a regular correspondent in his customers’ inboxes, urging them not to stockpile, reassuring them about the availability of groceries and explaining social distancing measures in stores.

As his tenure comes to an end, he will be best remembered for the deal he didn’t manage to pull off – the intended merger with Asda – rather than the one he did: the acquisition of the catalogue retailer Argos. But although he will probably leave Sainsbury’s with the share price lower than when he took over in 2014, the boost to the supermarket’s online capabilities from the Argos deal may have helped it cope with the virus-induced demand for deliveries.

The anticipated recession will bring more challenges for Sainsbury’s under its new boss. Analysts warn that cash-strapped consumers will start searching out cheaper alternatives, and may switch to discounters Aldi and Lidl, while a fall in disposable incomes could hit discretionary spending at Argos. Supermarkets have performed comparatively well during the lockdown, but the longer this crisis drags on, the more difficult it will be for grocers to avoid its economic consequences.