In the News Teaching Activity – Sainsbury confident of a profitable Christmas (Nov 2023)
Sainsburys believe they are winning back some market share from the discount supermarkets and are anticipating a good Christmas for profits.
Sainsbury's CEO, Simon Roberts, revealed the company's successful strategy against discounters Aldi and Lidl is paying off – it has increased market share and lifted their profit guidance due to strong grocery sales. Despite flat profits of £340m in the six months to September, Sainsbury's saw a 10.1% surge in grocery sales through volume growth though revenues have not grown as much because they have been helping to tackle inflation by adjusting prices down or keeping them low, particularly in fresh food. Although clothing sales dipped due to mixed summer weather, the company is looking ahead optimistically, anticipating increased profits and strong Christmas sales. Its share value rose by 5%, reflecting positive market reception to Sainsbury's tactics. Analysts attribute success to strategies like Nectar prices and the reduction of food inflation, highlighting the need to sustain volume growth in the future.
1 What is profit? Distinguish between normal and supernormal profit.
2 What is the market structure of the UK supermarket industry? Why might you expect firms in this industry to engage in a price war?
3 According to the article, what has happened to Sainsburys revenues and costs? Why is the CEO expecting a good Christmas?