The addition of sales space through both new store development and extensions is a key strand of our strategy to grow the contribution of non-food ranges. Over the three years to March 2010, the company expects overall sales growth to be split two thirds from food and one third from non-food with half the new space in that same period given to our growing non-food offer. By the end of March 2010 sixty 60,000 sq ft or larger stores will have over 15,000 sq ft of
non-food merchandise with TU clothing within 300 stores.
In August 2007, we announced our intention to move our central non-food operation to Coventry and the move is due to be completed by January 2009. The TU clothing team has been based at the Coventry site since the clothing brand launched in 2004 but this will see it become a consolidated general merchandise operation.
We are strengthening our senior non-food team with key recent hires bringing extensive
non-food retail experience from major competitors. We are also recruiting around 150 product designers, buyers, merchandisers and administrative colleagues to support the Coventry operation. Our specialist non-food team has grown over the last three years and investment has also been made across IT and the supply chain. The first general merchandise range to be fully designed from the Coventry site will be Autumn/Winter 2008. We have also strengthened our Asian direct sourcing operation, based in Hong Kong, which now has around 50 colleagues.
Reaching more customers through additional channels
Consumers’ shopping habits continue to change as customers increasingly want to be able to shop more frequently and more locally as well as via the internet.
Sainsbury’s online
Our online home shopping operation has had an outstanding year. Sales grew by 43 per cent with a record Christmas performance. The service operated from 147 stores at the end of the 2008 financial year but had reached 151 stores by the end of April 2008. It covers 85 per cent of UK postcodes and delivers to more than 90,000 customers each week, 40 per cent more than the previous year. We are expanding the number of delivery slots available to customers and continue to make operational improvements. We are also the first grocery retailer to operate an Electric Zero Emission vehicle. Many more are planned this year and our drivers continue to collect customers’ unwanted Sainsbury’s plastic carrier bags for recycling.
A natural extension of Sainsbury’s increasing in-store offer will be a service providing non-food products online and we have announced the launch of non-food online offer in the first half of the 2010 financial year. The new service will provide customers with the choice of a range of Sainsbury’s own-brand and branded non-food products. Our central online team is being doubled to work on developing and implementing the non-food offer online. It will also require dedicated IT and its own supply chain as well as retail and central trading support representing an estimated revenue investment of circa £15 million in the 2009 financial year and a similar amount in the following year.
Sainsbury’s Bank
Sainsbury’s Bank is an important part of the Group and following the creation of a 50:50 joint venture with HBOS in February 2007, the service was integrated into the core supermarket offer later that year. The Bank was re-launched with a product offer more in line with customer aspirations, including a market-leading internet saving product. Under the new joint venture arrangement with HBOS, we are reporting a small loss of £3 million for the full year.
Rob Walker retired as CEO of Sainsbury’s Bank earlier this month as planned after completing his two year contract. Under Rob, the Bank has made real progress and is now in a much stronger position for the future with more products and revenue streams and significantly reduced underlying bad debt. Neil Chandler, previously Head of Loans with HBOS, took over the CEO role at the beginning of May 2008.
Convenience stores
Growing presence in the convenience sector has been an important part of our MSGA plans and in March 2008 Dido Harding joined the company to head up the convenience operation taking over from Lawrence Christensen.
During the year 27 convenience stores were opened, six were closed, one was extended and 15 were refurbished giving a total of 319 by the end of March 2008. Almost all of the 168 stores originally acquired from Bells and Jacksons have now been transferred to the ‘Sainsbury’s Local’ fascia with the exception of 36 stores considered unsuitable for conversion and for which a sale process commenced in March 2008. Nine stores have been sold to the Co-op and a sale has been agreed for the remaining 27 to Martin McColls which will complete in stages over the next couple of months.
We have also ended our agreement with Shell UK whereby Sainsbury’s Local stores operated on Shell forecourts. A total of 24 sites carried the offer but the return on investment was not satisfactory to either party and 21 will return to Shell while three will continue to trade as Sainsbury’s Local.