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Wednesday, July 21, 1999 Published at 11:45 GMT 12:45 UK

Business: The Company File

Sainsbury's: 10,000 jobs in 'local' stores

The age of superstores is over - retailers discover the "small" format again

UK supermarket group Sainsbury's has announced that it plans to open hundreds of new stores in its new, small-size 'Sainsbury's Local' format.

Rory Cellan-Jones reports the formula is aimed at closing the gap between its rivals
Some 200 shops are scheduled to open over the next three years, creating about 10,000 jobs.

In the long-term, the company wants to open up to 1,000 new convenience stores.

The company said that none of the stores would have any sort of car parking. Instead, they would draw their trade from within a quarter of a mile from their location.

The expansion plan into the "convenience store" market comes as the food retailer is battling hard to revive its business.

Chairman of Sainsbury's Dino Adriano outlines the expansion plans
During recent years, Sainsbury's has fallen behind market leader Tesco.

The arrival in Britain of the world's largest retailer, Wal-Mart, who recently bought Sainsbury's rival Asda, has added urgency to the company's plans.

The 200 new stores will be located mainly in South East England, before the chain will be rolled out nationally.

Several city sites in Scotland are also being considered as part of the expansion, including Glasgow and Edinburgh.

Sales decline

Sainsbury's is struggling to contain a drop in sales. During the first quarter, like-for-like sales at its supermarkets and Savacentres fell 1.9%.

Sainsbury's other retail chains - Homebase home improvements in the UK and Shaw's foodstores in the United States - did reasonably well, delivering first-quarter sales growth of 6.6% and 2.2% on a like-for-like basis.

Sainsbury's Chief Executive, Dino Adriano, said the company was making extensive changes to boost sales: "We remain absolutely confident that we have identified the problems that have held us back and that the actions we're now taking are the right ones."

He predicted the company would achieve "positive like-for-like growth by the end of the current financial year".

Sainsbury's also said it would now include all UK staff with more than one full year's service in its share option scheme.

More than 120,000 staff who do not currently hold options will be granted them, to the value of 15 per cent of salary.

Critical analysis

City analysts have been critical of Sainsbury for many months, and the company had to endure a few more downgrades.

The industry watchers believe that while sales are likely to remain under pressure, cost saving targets of £160m by the end of next year look extremely ambitious.

"There's a likelihood of profit figures coming down further and I don't see cost savings coming through as timely as they want," said one analyst.

Sainsbury shares have underperformed the London market by more than 75% over the last 10 months. At 1232 UK time, the company's share price was down 3.25 pence, or just under 1.0%, at 384p.

No Sainsburys at Sainsbury's

The company also announced the immediate retirement of Timothy Sainsbury as a non-executive director.

This means that there are now no members of the Sainsbury family left on the board.

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