Sainsbury’s should be “lauded” for rapid expansion of online grocery despite £261m loss, say analysts

Ecommerce

Sainsbury’s rapid online shift should be “lauded” according to analysts, despite the retailer posting a £261 million loss over the past year.

The UK’s second largest grocer revealed a pre-tax retail operating profit drop of 22.2 per cent to £730 million for the year to March 6 this morning, stating that costs incurred to keep customers and staff safe had been “high”.

However, according GlobalData’s senior retail analyst Thomas Brereton, Sainsbury’s ability to rapidly adapt to shifting consumer demands and expand its online operations rapidly should be seen as a major success, going over and above its rivals.

“Sainsbury’s ability to quickly expand its online operations is at the core of this favourable performance; as a result, online sales now account for 42% of total retail sales,” Brereton said.

“Sainsbury’s should be lauded for embracing the dynamic shift in grocery channels, with groceries online growing at 119.6% to become a £3.6bn operation, and has displayed proficiency in growing both in-house operations (traditional grocery home delivery and Sainsbury’s Chop Chop) as well as expansion of partnerships with Deliveroo and Uber Eats (now reaching over 200 stores).

READ MORE: Sainsbury’s could soon be bought by private investors as billionaire buys £300m in shares

“But the groundwork for wider online transformation started with Argos several years ago, and the non-food specialist’s already mature online proposition was excellently placed to absorb spend from consumers forced online. For Argos (where 90 per cent of sales started online this year), and increasingly for the wider J Sainsbury group, online is no longer an additional extra.”

It comes amid speculation that Sainsbury’s could follow in Asda’s footsteps and become the next major UK grocer to be taken private by its major shareholders.

Speculation surrounding a possible takeover bid for Sainsbury’s was ignited after Daniel Kretinsky, billionaire owner of Vesa Equity Investments, increased his company’s stake in the grocer to 9.99 per cent.

Kretinksy, a major retail investor who owns 40 per cent in German wholesaler Metro, purchased £300 million worth of shares in Sainsbury’s from Qatar’s sovereign wealth fund.

It’s stocks hit a 12-month high in January as many saw Asda’s private acquisition as a potential new trend in retail, citing Sainsbury’s as low hanging fruit for possible investments.

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