By James Davey
LONDON (Reuters) - The next phase of British supermarket Sainsbury's strategy will aim to build on the momentum of a strong 2023 during which it said it drew customers back from German-owned discounters Aldi and Lidl with more competitive prices.
Chief Executive Simon Roberts will present Sainsbury 's strategy update on Feb. 7, with investors and analysts expecting him to set a new target for cost savings to finance both better prices and a 9% pay hike for 120,000 workers from March worth 200 million pounds ($254 million).
"They have been doing a very good job of improving the efficiency of the business, I would expect to hear more on that," one of Sainsbury's top 30 shareholders said.
Analysts and investors expect Roberts to detail profit growth opportunities, such as in retail media, and possibly issue some margin guidance.
Given Sainsbury's stronger balance sheet, they also expect Roberts to announce plans to begin a share buyback, with analysts at Barclays (LON:BARC) saying it can afford to spend up to 300 million pounds a year.
Sainsbury's has already said it will wind down its banking business and instead offer financial products through third parties.
Roberts launched his "Food First" strategy in 2020, shortly after becoming CEO, which concentrated Sainsbury's efforts on its core business, with a focus on better value, product innovation and service. The group has a 15.7% share of Britain's 229 billion pound food market, trailing only Tesco (LON:TSCO), according to researcher Kantar.
The strategy has proved successful, helping the group navigate the pandemic and an ongoing cost-of-living crisis.
Sainsbury's shares rose 39% in 2023, but have fallen this year on concerns over the outlook for general merchandise.
The group is benefiting from matching Aldi's prices on more than 550 key items and providing better prices to members of its popular Nectar loyalty scheme, financed by taking 1.3 billion pounds of costs out of the business in the three years to the end of March.
Completion of that programme will mean it has cut 2.5 billion pounds of costs over the last decade.
Speaking last month after reporting robust Christmas trading in food, Roberts said the strategy update would be "all about how we continue to build on our momentum."
"We keep finding areas where we haven't found the ceiling, we can push further, we can do an even better job for our customers," he said.
($1 = 0.7888 pounds)