Sainsbury’s announces huge changes to its shops as it launches ‘Next Level’

Sainsbury’s has revealed plans to overhaul its supermarkets in a bid to slash costs by £1 billion over the next three years.

The UK’s second biggest supermarket chain said it will cut its general merchandise and clothing offering across many shops to boost its food ranges.

It will also look to shut more standalone Argos stores and bring them within supermarkets as click-and-collect points under the plans.

The strategy revamp – called Next Level Sainsbury’s – will see it cut costs by £1 billion over the next three years, focusing on technology investments to deliver automation and savings.

It said it has no plans to shut stores and is not announcing staff cuts as part of the overhaul.

“High-returning investments in technology and automation will drive big steps forward in efficiency – automating, optimising and prioritising high-volume tasks and driving better forecasting,” it said.

Sainsbury’s also outlined plans to open another 75 convenience stores, to add to its existing 800-strong estate, while it will roll out rapid electric vehicle (EV) charging points to more than 100 stores by the end of its 2024-25 financial year, up from 20 currently.

Chief executive Simon Roberts said: “We’re determined to be first choice for food, ensuring more customers in more of our stores can enjoy more brilliant Sainsbury’s food.

“That means more space for our food offer, while still delivering the general merchandise products customers want from us.”

The company also announced aims to increase shareholder returns, with the launch of a £200 million share buyback programme over the next financial year.

Sainsbury’s said it only has a full food range across 15% of stores, but now aims to increase grocery across all its 600 supermarkets, while focusing expansion efforts on 180 “highest potential” sites.

In its strategy update, the group said it will also “tighten the focus” of its non-food ranges, but stressed it is not pulling back from offering non-food ranges.

On the Argos changes, it declined to give details on how many stores may be affected over the next three years.

It has already shut a raft of sites to bring many within supermarkets since it bought the retailer in 2016, saying late last year that it would reduce the estate to 180 by March.

“We have further to go in terms of Argos store estate changes and we will also further refine the store operating model, with clustered stores replacing a one-size-fits-all approach,” the group said.

It will also focus on expanding its Nectar loyalty offering, with goals for it to deliver another £100 million of profit contribution by March 2027.

The update comes just after the group announced last month it would wind down its banking operation to focus on the retail business.

Sainsbury’s said expanded food ranges will be tailored to each store, but will include the rollout of more fresh food and ready-to-go meals, such as its Kitchen Deli offering, as well as charcuterie and cheeseboard.

William Woods, a retail analyst at Bernstein, said the strategy update was “more evolution than revolution, as expected, building on the ‘food first’ strategy launched in 2020, which has so far been successful in turning around market share and bringing the focus back to food”.

He added the “commitments are a bit fluffy, such as delivering profit leverage from sales growth”.

Shares in the supermarket fell 4% in morning trading on Wednesday.