Nectar's contribution to Sainsbury's results

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By: Wise Marketer Staff |

Posted on November 21, 2002

Nectar's contribution to Sainsbury's results

UK supermarket group, J Sainsbury, has announced solid performance despite challenging market conditions, in which there is less overall growth than last year, and increased competitive pressures. Sainsbury's attributes part of this success to its partnership in the Nectar coalition loyalty programme.

The interim statement issued by Group CEO, Sir Peter Davis, asserts that Nectar now has some 11 million active card users throughout one third of UK households (around 8 million), and that the programme currently has the distinction of being the UK's largest loyalty programme.

The company sees the Nectar loyalty programme as both a powerful promotional tool and a mechanism by which it can identify and shape stores and products to better meet its customers' needs (see Oct. 14, 2002), and attributes some of its recent performance success to Sainsbury's involvement in the programme.

Keith Mills, chairman of LMUK (the operator of Nectar), commented: "In terms of active cardholders, we overtook Air Miles within the first four weeks and Tesco Clubcard within eight weeks. For purposes of comparison, Air Miles was launched in 1988 and Tesco Clubcard in 1995."

Supermarkets "In Sainsbury's supermarkets, we are focusing on building a strong business, more competitive for the future, whilst maintaining our market position", explained Peter Davis. The UK supermarket chain has already achieved £90 million of cost savings so far, and is said to be on track to deliver its target of £200 million for the year, and some £700 million in savings by March 2004.

The Sainsbury's to You shopping service's sales have increased by 90% against the first half of the previous trading year. Customer orders are running at over 33,000 per week, and the service has achieved further cost efficiencies. Losses have been reduced from £29 million (in the first half of 2001) to £19 million.

The group expects a further reduction of losses in the second half, expecting the online service to become profitable in the latter part of 2003/04. In October 2002 the service was extended through the launch of a new interactive digital TV service in cooperation with NTL (see Oct. 30, 2002).

Supply chain management Sainsbury's is replacing all of its UK electronic in-store systems and will have installed new equipment in more than 100 stores before Christmas 2002. Over the next 12 months this project will be completed, in addition to the replacement of most of the company's trading and supply chain systems.

Modernising the supply chain is a core strategy for Sainsbury's, the aim of which is to improve product availability while lowering operating costs still further.

Interim results summary Highlights of the group's interim results for the 28 weeks ending October 12th, 2002:

  • Underlying profit before tax increased by 10.7% to £342 million (from £309 million in 2001)
  • Interim dividend is up 5% to 4.22 pence per share (from 4.02p in 2001)
  • Pre-tax return on capital employed increased to 11.5%

Highlights for Sainsbury's supermarkets in the UK:

  • Underlying operating profit is up 14.9% to £286 million (from £249 million in 2001)
  • Business transformation programme and cost savings are on track so far
  • Operating margins (VAT inclusive) have increased to 3.8%

Highlights for Shaw's Supermarkets in the United States:

  • Underlying operating profit is up 8.8% to US$110 million (from US$101 million in 2001)
  • Acquisition of 18 stores in New England for US$75 million.

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