J Sainsbury SWOT and PESTLE Analysis

Strength

1. Diversified business with strong market share: Sainsbury’s is currently operating over 1200 supermarkets and convenience stores, online grocery and general merchandise operation which stands as one of its key strengths. It is also one of the largest merchandise and clothing retailers in the UK offerings its products across Sainsbury’s, Argos and Habitat brands. Along with this, J Sainsbury plc has property ventures with various other groups and together provides a range of quality banking and insurance products to the various segmented customers. With most of the big supermarket chains in United Kingdom struggling to maintain their existing market share, Sainsbury has moved to the 2nd spot with the market share of 16.9% and stands out as the company who is getting considerable sales and loyalty from customers when compared to its competitors.

2. Strong balance sheet with consistent profitability: Sainsbury’s has a robust balance sheet with a reduction of net debt of £349 million in FY16 to £1,477 million. The group enjoys a financing facility of £3.9 billion of which it has only used £2.7 billion. This facility is partly leveraged through the financial services division - Sainsbury’s Bank. The company has paid 10.2 pence per share in FY16 and over the last five years it has paid a cumulative £1.4 billion in cash dividends to shareholders, equivalent to 69.5 pence per share which shows its consistent profitability and shareholder returns. Sainsbury’s achieved £130 million in cost savings in FY16 is also on track to deliver the £500 million savings target by 2017/18 and has another £500 million cost savings target over three years from 2018/19 which will further aid profit margins.

3. Differentiated food proposition with great quality: Food and food products is a core part of its business and it offers more than 3,000 Sainsbury’s branded products in the segment including ready-made meals, gourmet bakery lines etc., which are quite appreciated by the customers. Customers have consistently rated Sainsbury for food quality ahead of its peers according to HPI Brand & Communications survey. It has launched innovative and in-demand products over FY16 such as Deliciously FreeFrom - allergen-free food range; On the Go - range of breakfast, lunch and snacking line; offering value to customers across segments. It is also the only supermarket offering gluten-free bread and a diverse vegetable range. Also keeping the customer’s healthy life in focus, Sainsbury’s has reduced sugar content in its cereals by 13% and more the three tons of salt content in canned beef products without altering the taste. Sainsbury’s is continuing to invest in the quality and price of by Sainsbury’s range which delivered a volume growth of 2% in FY16.

4. Great place to work at with employee diversity: Currently, Sainsbury’s group has more than 195,000 employees who provide great services to the customers. Since 2008 the company has employed over 27500 people in the YOUCAN scheme which is the proof of the company’s diversity and inclusion domain. The company is also a member of the Stonewall’s Diversity Champions program and aspires to be a leader in creating disability-friendly workplaces.

Weakness

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Opportunities

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Threat

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Political

1. UK’s Political relations with Qatar to impact Sainsbury’s: Qatar, the peninsular Arab country is recently undergoing a political crisis with a blockade being imposed by its neighbours including Saudi Arabia and UAE. All the three countries are allies of UK, however if UK take the side of the Saudi group, its political rapport with Qatar may deteriorate. Qatar Investment Authority, the sovereign wealth fund of Qatar holds 26% stake in Sainsbury’s and the Qatari representatives exert significant influence in the board. Any tensions with Qatar may affect the management operations of Sainsbury’s.

Economical

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Social

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Technological

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Legal

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Environmental

1. Reduction of operational waste and recycling: Sainsbury’s strives to reduce resource wastage across its operational activities through internal organizational initiatives and collaborations with partners. It is a signatory to the Courtauld 2025, launched in March 2016 whose aim is to reduce UK’s food and drink waste by 20 per cent and greenhouse gas intensity of food and drinks consumed by 20% through specific time-bound targets. It also collaborated with Waste & Resources Action Programme (WRAP) to minimize packaging and food waste across is stores. Sainsbury’s further delivers surplus food to charities address the socio-economic aspects of its business.

2. Reduction of carbon emissions: Sainsbury’s has set targets for reduction of its operational carbon emissions by 30% absolute from FY16 and 65% relative to 2005. It is executing the same through initiatives like innovation in refrigerant gas usage in trucks and optimized transportation. The retailer has also achieved an absolute water usage reduction of 29 per cent in FY16 versus 2005 levels.

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