Sainsbury (j) Share Discussion Threads

[loganair] 07/11/2023 20:52

The fulfilment cost of storing, picking, packing and delivering online groceries is significantly greater than that incurred by traditional bricks and mortar stores, cutting heavily into profit margins which are already looking slimmer than hoped.

According to GlobalData senior retail analyst Eleanor Simpson-Gould, existing profits are squeezed even further by “escalating costs on overheads associated with operating delivery services”, such as wage inflation for drivers, pickers and packers, fuel for delivery vehicles and energy costs.

GlobalData expects UK online sales for food and grocery to continue to lift over the next five years, growing by almost 30% by 2027.

[loganair] 07/11/2023 20:24

It seems to me Supermarkets sole reason for home delivery is to not lose market share even though it undermines the supermarket profitability. I've posted for many years that market share is meaningless, it profitability that's important to the share holder.

This fear of losing market share means that the supermarkets place home delivery operations higher up on their strategic agendas.

"Online sales of groceries whether home delivery or click and collect are making a loss. Customers who pick their groceries from the shelf themselves are much cheaper for the supermarket than home delivery. No one dares to put the service costs entirely on the consumer's plate."

When I go to the supermarket myself I do my own picking, checkout and delivery to my own home therefore this cost is transferred to me the customer while home delivery these costs are transferred from the customer to the supermarket while the associated expenses are not fully passed onto the service fee.

The more home delivery and click and collect a supermarket, Sainsbury's has the lower the footfall which in turn leads to cuts in retail surface and investment which in turn leads to less isle crossover to Home ware, clothing and Argos.

The more home delivery Sainsbury's has the less sense it made to take over Argos and Habitat and bring them in store.

[bountyhunter] 07/11/2023 19:01

Oh, you meant a loss of 50% on delivery charges! That makes more sense.

[loganair] 07/11/2023 18:53

Delivery charges still need to go up by at least a further 50% or more to just break even on home delivery.

[bountyhunter] 07/11/2023 17:17

50% loss on deliveries, surely not, that can't be right. Delivery charges are higher than they used to be and there are in store cost savings to add.

[loganair] 07/11/2023 15:20

Ocado is basically a technology company and sells it to other companies for huge amounts of money and even so Ocado have never made a single penny of profit and they themselves say the company is not likely to make a profit for several more years to come.

As far as I see, home delivery runs at a circa 50% loss for the supermarkets.

Take my local Tesco, 8 delivery vans, which have to be bought and maintained, taxed, insurance + fuel with 6 drivers and at any one time 10 packers going round the store packing items for delivery, the same items that 10 shelf stackers took from the warehouse at the back of the store to stack on the shelves.

I calculate it costs my local Tesco circa £500,000 per year to conduct their home delivery to no more than 3,000 households = circa £166 per household per year or if 2,500 households = £200 per household per year.

[bountyhunter] 07/11/2023 14:43

Ocado looks like it's picking up again?
Ultimately it must make sense to deliver from an automated warehouse rather than "picking" from stores. Ocado could perhaps be acquired by Amazon at some point?

[pirates4] 07/11/2023 13:10

https://www.betterretailing.com/industry-news/first-costcutter-iceland-hybrid-convenience-store-launch-wolverhampton-sgn-retail/

[spob] 07/11/2023 07:16

.
"What a changed world"

Yeah. This company is practically dead now. I mean from an investing point of view.

[loganair] 06/11/2023 22:25

In many towns, M&S are now the only men's clothing retailer.

[bountyhunter] 06/11/2023 20:57

Yes I realise that, but recently they haven't been doing at all badly on the back of other stores having closed down throughout the pandemic, e.g. Debenhams, etc.

[konradpuss] 06/11/2023 20:04

Not sure, however I think Tesco opened one last year.

What a changed world.

Now it's the turn of Lidl and Aldi on their roll out. Not very big stores mind.

[spob] 06/11/2023 19:51

.
Anyone rememeber the last time Sainsbury's opened a brand new full size supermarket, that was not a replacement for a nearby store ?

I remember when they were opening 3-4 new supermarkets every single month.


I guess they have too much debt and tiny margins to even think about that now.

[loganair] 06/11/2023 19:03

bounty - In 1990, M&S were the first British retailer to make £1bln profit (£5bln into days money) where as today they're barely able to make £500mln profit, 1/10th of the profit they're making 30 odd years ago.

[bountyhunter] 06/11/2023 18:48

They should maybe advertise some of the more popular Argos products around the food isles, e.g. toasters in the bread isle, microwaves in the freezer section, etc.

[loganair] 06/11/2023 11:49

anhar - It's taken me rather a long time to realise that it's the non-groceries where the supermarkets make their money and the more successful they are at getting their customers to change to these isles the more profits they make and from what I see Sainsbury's are not at all successful it getting their customers to change isles.

It seems to me that in the end the buy out of Argos has brought no extra value to Sainsbury's or the share holders of Sainsbury's - just £1bln down the drain and not well spent. The only people who made money out of it were all the city advisors.

[bountyhunter] 06/11/2023 11:00

M&S have been doing very well recently (although not long term) along with many other retailers.

Yes la ~340p would have been a good time to sell - remind me if/when we get back up at that level! Bestway haven't gone away and may be just biding their time. Meanwhile there is a near 5% yield to collect.

[philanderer] 06/11/2023 10:19

Bernstein raises Sainsbury's price target to 290 (270) pence - 'market-perform'

[anhar] 06/11/2023 09:54

It's one of those popular fallacies that because everybody has to eat, or whatever it is, that therefore shares in those businesses must be a sure thing.

The reason it's false is competition, which limits exploitation of necessities like people having to eat etc. Supermarkets are a prime example of this, a classic capitalist situation where intense competition puts a brake on prices and growth.

It would only be true in a monopoly, as for example in utilities. But what happens then is that in order to limit exploitation of those industries due to their monopolies, they are regulated.

[loganair] 06/11/2023 09:15

Good question?

I thought as everybody needs to eat Supermarkets were supposed to be a sure thing, especially years ago after the QIA took a 25% stake in the company - at the current share price at least I'm not underwater when it comes to the price I paid for my Sainsbury's shares.

When the share price reached circa 340p during the ASDA take over saga, yes, it would have been for the best to have sold my shares then.

Sadly most retailers including Sainsbury's and M&S have gone backwards at a rate of knots over the past 20 to 30 years.

[bountyhunter] 05/11/2023 22:33

So why are you invested in Sainsbury's? #399

[loganair] 05/11/2023 22:03

Where do I see Sainsbury's failing?

Groceries is a low margin business and for the larger supermarkets groceries are their to enable the supermarket to move customers into the high margin discretionary spending categories like clothing (TU), home furnishings (Habitat) and Argos.

Sainsbury's doesn't have to make much in terms of groceries because there strategy is to bring people in and then to sell them other stuff because people need to replenish their fridges which drives frequency and that frequency can turn into other sales of other items that tend to be higher margin.

The most important thing is for Sainsbury's to get people to cross from the grocery isle to the clothing, home ware or Argos isle (why Sainsbury's have brought the vast majority of Argos to in store and closing down their stand alone outlets) as that is where Sainsbury's will make its real money. Sadly at my local Sainsbury's I do not see this happening, most of the times the in store Argos is all but empty of customers and I see little to no cross over to the Habitat home ware isles.

What a share holder need to be able to quickly and easily find are the margins separately for each of grocery, clothing, Home ware and Argos - and it is not easy to find, in fact very difficult to find.

[noobiedoobie] 04/11/2023 11:03

I am aggressively buying SBRY next 6 months, target 500p+

I am one of those shoppers who has switched to SBRY permanently from Lidl Tesco. Since joining nectar program I do indeed make great savings on personalized nectar offers and since the company rolled out smartshop scanners in-store I have been taking full advantage of the 25-30% multi use discounts I get on selected items that change each week.

I also don't live near a Aldi so SBRY price matching to Aldi means I get best of both worlds without traipsing about looking for a Aldi when I have no car

I certainly spend more there now

There is no reason SBRY shouldn't be at prices that OCDO have been at given that OCDO hasn't even been profitable

[philanderer] 03/11/2023 13:48

Barclays raises Sainsbury's price target to 310 (300) pence - 'overweight'

Jefferies raises Sainsbury's price target to 300 (270) pence - 'hold'

[loganair] 03/11/2023 11:46

Can you believe it, since the beginning of term nearly 20% of the teachers at my sons college have left to work in Tesco, Sainsbury's or McDonald's because they pay more, therefore the college has had to cancel most Fridays lessons until Christmas.

Something has gone wrong with society in Britain when society values supermarket and fast food workers over teachers who are passing on valuable knowledge and skills onto the younger generations.