Sainsbury’s boss Coupe takes parting shot at Amazon on business rates

The supermarket giant will receive a £450m business rates holiday in 2020 after chancellor Rishi Sunak put a host of fiscal measures in place to help companies through the coronavirus crisis.

But Sainsbury’s insists that the rates relief and additional food sales it will make during the pandemic will only “broadly offset” the £500m impact on its bottom line. Profits will be dented by additional payroll costs, the implementation of in-store measures to protect staff and shoppers, reduced profits from its banking arm, and lower sales in fuel, general merchandise and clothing.

Sainsbury’s grocery sales grew 12% in the first seven weeks of its new financial year, while Argos’ sales advanced 9%. But clothing revenues plummeted 53%, other general merchandise sales dropped 22% and fuel sales tumbled 52%.

“We don’t see the need to extend Sunday trading laws and we are not particular advocates of it”

Mike Coupe, Sainsbury’s

 

The grocer’s outgoing boss Coupe said that, against that backdrop, it was right to accept the business rates holiday – but once again called on the government to reform the tax once the pandemic had passed.

“We continue to be one of the biggest taxpayers in the UK, regardless of the benefit of business rates,” Coupe said.

“Of course we are appreciative of the business rates cover that we get, but there are very, very substantial costs in our business, we have not furloughed any of our colleagues and we haven’t deferred any of our VAT.

“We will stay pay more business rates on our offices and our warehouses than Amazon will pay this year, just to put that in context.

“In the end, there is a fundamental issue when you come out the other side as to how businesses like ours are taxed. We still believe that business rates are disproportionately burdensome on bricks-and-mortar retailers such as ourselves and one way or another that has to be reformed.”

Exit strategy

Coupe also called on the government to provide clearer guidance around its potential exit strategy from lockdown and social distancing measures so that Sainsbury’s and other essential retailers could prepare.

He said it was likely that Sainsbury’s would “act as a benchmark for what other businesses might have to do” and the government needed to communicate with businesses of its ilk to ensure they get their exit strategies right.

“We, and more broadly the industry, has responded incredibly quickly and incredibly well to the challenges that have been put in front of us,” Coupe said.

“Above and beyond anything else, just having clear guidelines on what it is that we’re required to do, based on the science and the guidance from the government, is central to what we need looking forward.”

One thing Coupe does not want to change is Sunday trading hours. Some of Sainsbury’s competitors have called for the rules to be relaxed during the lockdown to help smooth the pattern of trading throughout the week.

 

But Coupe suggested that footfall to its stores on Sundays has decreased year on year during the pandemic.

“We are not an advocate of extending Sunday trading laws,” he said. “We don’t think it is necessary and ironically, what we have seen as a result of this crisis is a much more smooth demand pattern across the week.

“Mondays are much larger, as is the early part of the week, and the weekends actually tend to be softer. Sunday, year on year in terms of sales, is actually down reasonably significantly.

“We don’t see the need to extend Sunday trading laws and we are not particular advocates of it.”

During what was his final press conference as Sainsbury’s chief executive – he hands the baton to current retail and operations director Simon Roberts on June 1 – Coupe said he expected “full lockdown” to last in the UK until the end of June, before “some loosening of the shackles” during September. But he believed “some form of social distancing” will be in place for the remainder of the calendar year.

He said that would result in “some economic impact” and suggested demand for big-ticket products was “likely to fall during the latter part of the year”.

However, he added it was “very difficult to predict” which new shopping habits would endure following the crisis.

Digital shift

Sainsbury’s has seen a rapid shift to online shopping with ecommerce customers spending, on average, 50% more than previously.

People shopping in-store are purchasing “roughly twice what they would have normally bought” and almost one-third of physical sales being made in Sainsbury’s supermarkets are done so through its SmartShop mobile app.

“There are some things which will certainly endure,” Coupe said. “Once you’ve used SmartShop and gotten used to it, I suspect you won’t go back to a conventional checkout.

“The jury is out on the volumes of online groceries, but again I suspect that once people get into the habit of ordering groceries online, it is likely to be sticky.

“Equally, there are all sorts of unknowns. What is going to happen to the high street as a result of the particular scenario we have seen? Some parts of the high street have done quite well – if you look at independent food shops – but other parts have completely closed. It’s very difficult to predict.”