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Sainsbury’s – Investor Relations Report

Introduction

Sainsbury’s is the third largest chain of supermarket in the UK. It started as a family business back in 1869, the original Sainsbury s’ family now own approximately 15% of the business while the majority of the shares is now own by the Qatari royal family. This report is going to talk about the way on which the supermarket is communicating with one of their more important stakeholders: investors. Moreover, another related aspect will be considered, how well the organisation is communicating their performance information to others groups of stakeholders rather than investors. A full map of Sainsbury’s stakeholders can be found in appendix 1.1 Strengths and weaknesses will be analysed in order to find possible leaks that the company have and, whether those are present how the organisation can fix them, perhaps looking at competitors efficient ways on dealing with similar issues. In order to do that a range of material will be analysed and particular focus will be placed upon the company’s website and their annual report as those two are the main channels of communication more used to deliver financial results and everything related to it. With the purpose of delivering a fair and truthful judgement upon Sainsbury’s stakeholders’ communication strategy a wide range of sources will be used such as books, articles and competitor’s material. To make it clear, these are the question the report wishes to answer with a solid explanation: 1. Is Sainsbury’s clear and punctual on communicating to their investors? 2. What channels do the company use to communicate financial matters?

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3. How does Sainsbury’s communicate their performance to all of its stakeholders? 4. Are the main competitors of Sainsbury’s such as Tesco and Marks & Spencer doing better as far as communication of financial results is concerned? 5. Is there a way on which Sainsbury’s can improve its communication system taking good example from their competitors or rather listening to feedback from the company’s stakeholders?

The point of view used for answer these questions is a public relations one and, more precisely, the role of head of investor relations. Here is the definition of investor relations given by the National Investor Relations Institute: “Investor relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation” (NIRI, 2003). It is important to highlight how this definition refers to a two-way communication between the company and its stakeholders. In fact, the instrument of feedback it is particularly relevant for companies in today’s market. Especially for shareholders it is central to be heard from the company and to know that their opinions matter. Another aspect to be analysed of Sainsbury’s communication strategy will be their way on implementing a sincere two-way communication. This is an appropriate parameter on which to judge the efficient of the company as far as communication to shareholders is concerned. First a brief description of Sainsbury’s investor relations will be carried out, then possible issues as well as good points will be analysed.

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Key messages Due to the high number of Sainsbury’s stakeholders as shown in the appendix 1.1, just some of them have been chosen to portray the company’s key messages. The more important key messages that the organisation is aiming to communicate to stakeholders are shown below: 1. Communities: To be a good neighbour, to support and help local communities, to be at the heart of the communities Sainsbury’s serves. 2. Consumers: To be the best for food and health, best products at fair price. 3. Activists: To respect the environment and to be the UK’s greenest grocer 4. Staff: To be a great place to work. 5. Shareholders: Sainsbury’s is committed to operational excellence. (Sainsbury’s, 2012) As is possible to see none of the key messages Sainsbury’s is giving to their stakeholders is related to investor relations apart from the one directed to shareholders therefore it will not possible to assess the key messages in this report. However, it is still possible to evaluate how the organisation communicates their performance to different stakeholders.

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Situation As mentioned in the introduction Sainsbury’s mainly use two channels to communicate its finance related matters. First in term of relevance to all of the stakeholders interested upon financial issues is the ‘Investor centre’ section of the website. It is easy to find it and in it is possible to collect information regarding both financial analysis and future intention of the company such as the chairman statement. The web page present at the top financial information such as the current share price while at the bottom is possible to notice links to company’s reports as well as the latest stories from Sainsbury’s. Secondly, the annual report has a great importance because it covers several areas of the business, not just strictly financial and stakeholder can get an overview on what the organisation has done in the past year as well as the plans for the future year. The annual report is divided in three sections: Business review, Governance and Financial statements. While the last section is mainly directed to investors and financial analysts as it goes into deep description of all of Sainsbury’s finance numbers of the past year, the other two are directed to other stakeholder groups such as costumers, journalists, bloggers, and employees. Another way on which Sainsbury’s communicates with their investors, is through the annual general meeting (AGM). On a dedicated section of the website is possible to download the presentations held at the last AGM which occurred on the 11th of July 2012 in London at the Queen Elizabeth II conference centre. In such events investors have a chance to talk with board members about the organisations performance and vote for a series of resolutions. This is a good example of twoway communication; investors know that their opinion will matter. “Individual shareholders are beginning to dominate news media coverage of AGMs.The change in investor profile over the years means that, although statistically small, the sheer number of individual investors in companies has increased, and they are not only attending but also voicing their opinions at company AGMs.” (Gunning 2007, p. 311)

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It is a very good thing for Sainsbury’s continuing to organise annual general meetings. However, It has to be added that such meetings are open and directed to a very niche group of stakeholders.

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Analysis/Overview of the communication strategy

Website If any of the stakeholders of Sainsbury’s is looking for the organisation’s financial information on the Internet it will be directed straight to the Investor Centre of the company. In fact, typing words such as ‘Sainsbury’s share price’ or ‘Sainsbury’s financial statement’ on Google will lead the visitors straight to the Investor Centre of Sainsbury’s. As Phillips states (2009, p.25) if people are able to find a web page easily using search engines such as Google the reputation of the organisation is enhanced.

Figure 1: Sainsbury’s Investor Centre

It is a good aspect that the company is using the same texting and colours through all of the part of its website included the Investor Centre. Being consistent on representing the brand message is vital for any organisation.

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Moreover, important figure such as the share price are easy to find and they are highlighted in big characters. One of the main objective that a organisation have to pursue in order to have a successful website is the follow: “every page should be engaging and should offer an elegant exit, either to keep the visitor on the site or to offer a worthwhile place to go next” (Phillips 2009, p. 187). For stakeholders such as consumers and journalists that are not strictly connected to financial matters, this section of the website it’s appealing and enjoyable to navigate. To better understand this segment a comparison with a direct competitor has been made.

Figure 2: Screenshot of Tesco’s website: Investor section

In Tesco’s ‘Investor Centre’ there is a major use of text that can be confusing to stakeholders. When stakeholders are looking for financial information about the organisation they are mainly interested in numbers rather than words. The only relevant figure that appears on Tesco’s site is the share price of the day while in Sainsbury’s one other figure are present such as the company’s profit and sales percentages.

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Another good aspect of the website is that links to the company’s financial reports are easy to find and clear to read for every kind of stakeholders, even those who not have a strong financial knowledge as figure 3 shows.

Figure 3: Sainsbury’s share price chart

However, Sainsbury’s fails on giving a positive impact on communicating in a welldefined way its strategy to stakeholders. It is confusing for stakeholders to look for Sainsbury’s strategy, the words used in the main picture are too generic and fails therefore to portray a clear strategy.

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Figure 4: Sainsbury’s business strategy section

As far as business strategy is concerned the job delivered by Tesco is more appealing and effective. The use of bullet points is appropriate and has a strong outcome on the visitor eyes. Moreover, Tesco decided to use more specific words to describe it’s strategy, not all of the stakeholders have the time to read each different section, so just by reading these bullet points the vision of Tesco appears clear to them.

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Figure 5: Tesco’s strategy

Sainsbury’s is advised to improve the strategy section of its website by using less picture and more bolding text. When the public is looking for a company business strategy it is not interested on pictures. The use of attractive pictures is good on other sections of the website to attract the attention of consumers on special offer perhaps. Adopting bullet points can definitely increase the clarity of Sainsbury’s method of communicating its business strategy to all of their stakeholders. Finally, in the Investor Centre big emphasis is given to the company’s reports, one in particular attract the attention of the visitor and has a great importance for the organisation and all of its stakeholders: the annual report

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Annual Report The layout of Sainsbury’s annual report is overall pleasant and it adapt perfectly to both, glossy hard copies and PDF formats. This is noteworthy because companies are currently giving away less hardcopies and most of their stakeholders are downloading the annual report as a PDF file. A bad example of bad adaption PDF annual report can be seen on Figure 6, Tesco uses the double-page format that does not look good on PDF.

Figure 6: Screen shot of Tesco’s 2012 Annual Report

Furthermore, stakeholders such as journalists and the general public may prefer to watch a video or listen to a podcast that outlines the general issues revealed on the annual report instead of reading through it as they not have the time or the necessary familiarity with more of the technical terms used in it. Therefore, it is imperative for an organisation to have audio-visual materials such as CEO video statement. Sainsbury’s does not provide audio and video files on their website and this is a big lack that has to be fixed. One of the main competitors of Sainsbury’s is Marks & Spencer and their use of videos for explaining financial matters through the CEO is Page  11  of  23    


exemplificative. Links for both, the CEO and chief financial officer videos can be found directly on the homepage of the Investor section of the website.

Figure 7: Marks & Spencer – CEO statement: Marc Bolland talking about the half-year results of the company

The first two sections of Sainsbury’s annual report address in an effective manner employees, consumers, journalists, communities and any other stakeholder who does not possess the adequate knowledge to understand financial tables. The language used by the chairman and the chief executive in their report is easy to understand and they both avoid financial jargon in order to make all of the stakeholders understand how the past year gone for the company. Future plans and strategies are summarised in a transparent and clear mode. A point that can be made about the two statements is that they over loop each other by talking about very similar arguments in an equivalent way. Both the chairman and the chief executive are advised to split the topics between them. For instance, if the chairman is talking about strategies and values of the organisation, the CEO talks about the business figures to shareholders or vice versa. The last section of the report is the longer one, it incorporates the financial statements and it is addressed mainly to shareholders and analysts. It is overall Page  12  of  23    


well written and the tables are easy to read, important numbers highlighted and it gives all the figures a shareholder will be interested in. It was not possible to find any particular issue in this portion of the report.

Figure 8: Sainsbury’s annual report – Balance sheet

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Conclusions and Recommendations The report aim was to answer the questions outlined in the introduction regarding the company’s communication strategies about their performance to its full range of stakeholders. Sainsbury’s use two main channels to communicate its financial performance to all of their stakeholders: the website and the annual report. A strong point for the companies is that it runs annual general meeting when shareholders have the chance to meet the board members and discuss about the company’s business strategies. The importance of these meetings is highlighted in page 4 of this report. Overall, Sainsbury’s is clear on communicating its financial performances business view, especially through its website which is very well structured and appealing for every user/stakeholder. However, a few issues have been established when analysing both, the annual report and the company’s website. First of all, the way on which Sainsbury’s reveals its business strategy has to be improved as it is not effective and it is very confusing for all of those who visit the website. As mentioned in the analysis, a good recommendation for Sainsbury’s is to display its strategy through a series of bullet points with the use of few more words that are not that generic as those the company is using at the moment. Another crucial improvement that Sainsbury’s could take is to improve the statements in the annual report. Both, the CEO and the chairman statements are well written but they should talk about different topics in order to not sound too repetitive for the stakeholders reading them. A simple solution to this problem will be to decide between them two what subject each of them will cover before the release of the annual report. The suggested method is: for the chairman to talk to shareholders about the financial overview while leaving the chief executive to go through the company values and other themes. Finally, Sainsbury’s is strongly advised to produce and upload on the corporate website video of its CEO talking to stakeholders about financial matters and Page  14  of  23    


company’s views. “Video is the most engrossing and persuasive medium and has exploded as a communications currency over the past few years. Communicating through video gives us an opportunity to show potential clients that we are professional, likeable and trustworthy. This is crucial to growing businesses because it’s proven that people will buy from others that they like and trust” (Ashe, 2009). To summarise, is possible to try answering the more important question: Is Sainsbury’s doing better in this field in relation to main competitors? As far as the research and the theory have shown Sainsbury’s is communicating better to its stakeholders about the company performance compare to Marks & Spencer and Asda (there was no chance to show Asda negative point in this report due to a word restriction). If Sainsbury’s is doing better than Tesco overall is hard to tell because both of the retailers have a really good communication strategy. However, Sainsbury’s have the chance to be the referent point of investor relations between all of the major UK retailers by following the few advices portrayed in this report.

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Appendix 1

Sainsbury’s Stakeholders Map

Market   agencies  

Regulators   Local  councils  

Trade   associaFons  

Employess  

Shareholders  

Unions  

Board  of   directors  

Suppliers  

Sainsbury's     Fiance   analysts  

Press  

Customers  

Government  

Owners  

AcFvists  

CompeFtors  

CommuniFes   Government  

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Appendix 2.1

Shareholders are more important than customers Sainsbury’s will is against this statement. Customers are the most important stakeholders for organisations and so they are for Sainsbury’s. To better explain this position an example can be brought to attention. In October 2012 Sainsbury’s was forced to change its “brand match” campaign after several complains by customers and the authority that monitor adverts in the UK. In this campaign Sainsbury’s was claiming that consumers would not pay more for brand products in Tesco or Asda and if buyers were able to find the same product cheaper in any of the two retailers, they would have get a voucher representing the price difference. Complaints from customers were regarding the fact that the conditions of the promotion were not clear in the adverts, in fact, in order to get the voucher consumers were meant to spend at least 20£. Sainsbury’s response gives an idea of how much the opinion of their customers is important for the company: “Sainsbury's is committed to providing advertising that our customers can easily understand. We do not believe that our customers have been misled but we have already changed our current advertising to reflect the concerns raised.” (Clarke, 2012) Shareholders could be more important than shareholders just when a company is about to start and it is looking for investments in order to enlarge its business. Once a company is established, customers are more important as those are the individuals who bring value and money to the company. If a company has no customers it will fails quickly and this is the reason all of the organisations invest big quantity of their capital on communicating to their customers with TV adverts for example. Appendix 2.2 Page  17  of  23    


What ‘the public’ thinks doesn’t always matter. Sainsbury’s considers that what the public think does always matter. Without the support of the public there will be no success for any organisation. It is important to look after the public opinion especially in today’s world with the big relevance that social networking has. In order to sustain the motion it is easy to point out how much all of the organisations invest in their Public Relations department. It is vital to check and control what the public think about your organisations. Sainsbury does itself have a lot of ways to check the feedback from their customers for example. Moreover, the enhancement of the two-way communication between the organisation and its public is a key factor for the success.

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Appendix 2.3 You don’t always have to tell the truth to the press.

Sainsbury’s disagrees with this statement. Telling the truth to the press, even if this is an inconvenient one can provide benefits in the long term. If stakeholders know that the company is willing to talk about everything they will trust more its communication. The reputation of a company can therefore enhance. On the other hand, if a company try to cover a bad news, this can lead to a boomerang effect; when the news will come up, revealed by a journalist or a competitor it will produce more damage to the company, as stakeholder would loose their reliance on the organisation. In March 2011 the CEO of Sainsbury’s Justin King declared that he was pessimistic about the UK market (Marian, 2011). This statement could have cause lead the investors of Sainsbury’s to loose faith in the company. However, being honest with the press can have positive impact in the long term because the public will have more trust in the organisation.

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Appendix 2.4 All publicity is good publicity The company is for the motion. Sainsbury’s believes that is always better to be talked about that to not being talked about. Even though publicity cannot always be good, it is still possible to change the public opinion thanks to a good work by the communication team. In October 2012 Sainsbury’s was accused by its customers after the decision of dropping the Red Tractor logo on its British products. Sainsbury’s explained that the decision was made in order to simplify the labelling on its products that could be confusing for consumers (Driver, 2012). Even though the publicity in this case is not good, the organisation has the chance to open a dialogue with their customers. By doing that Sainsbury’s show that the opinion of customers is important and it is taken into consideration.

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Reference List Ashe, F. 2009. Why communicating through video? Tweekyourbeez.com (online) (viewed on 4/12/2012). Available from: http://tweakyourbiz.com/marketing/2009/10/22/why-communicate-throughvideo/

Clarke,J., 2012. Sainsbury's ad campaign ruled misleading by ASA. The Independent (online) (viewed on 22/11/2012). Available from: http://www.independent.co.uk/news/media/advertising/sainsburys-ad-campaignruled-misleading-by-asa-8195188.html

Driver, A., 2012. Customers attack Sainsbury’s for ditching Red Tractor. Farmers Guardian (online) (viewed on 11/12/2012). Available from: http://www.farmersguardian.com/customers-attack-sainsburys-for-ditching-redtractor/50698.article

Gunning, E. 2007. Public Relations: a practical approach, 2nd edition. Dublin: Gill & Macmillan Ltd

Marian, P., 2011. Sainsbury's expects little improvement in consumer confidence. Just-style.com (online) (viewed on 29/11/2012). Available from: http://www.juststyle.com/analysis/sainsburys-expects-little-improvement-in-consumerconfidence_id110666.aspx

NIRI, 2003. NIRI (online) (viewed on 10/12/2012). Available from: http://www.niri.org/about/mission.cfm

Phillips, D. and P. Young, 2009. Online Public Relations, 2nd edition. London: Kogan Page

Sainsbury’s plc, 2012. (online) (viewed on 11/11/2012). Available from: http://www.j-sainsbury.co.uk

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List of Illustrations Figure 1: Sainsbury’s Investor Centre. (online) (viewed on 20/11/2012). Available from: http://www.j-sainsbury.co.uk/investor-centre/

Figure 2: Tesco Investor section. (online) (viewed on 25/11/2012). Available from:   http://www.tescoplc.com/index.asp?pageid=7#ref_plc/ir

Figure 3: Sainsbury’s share price chart. (online) (viewed on 2/12/2012). Available from: http://www.j-sainsbury.co.uk/investor-centre/share-price/share-pricechart/#tabbed_section

Figure 4: Sainsbury’s strategy overview. (online) (viewed on 28/11/2012). Available from: http://www.j-sainsbury.co.uk/about-us/business-strategyobjectives/

Figure 5: Tesco strategy. (online) (viewed on 28/11/2012). Available from: http://www.tescoplc.com/index.asp?pageid=12

Figure 6: Tesco’s 2012 annual report. (online) (viewed on 30/11/2012). Available from: http://www.tescoplc.com/files/pdf/reports/tesco_annual_report_2012.pdf

Figure 7: Marks & Spencer half-year results video. (online) (viewed on 5/12/2012). Available from: http://investor-marksandspencer.com/mb-hy2012.html

Figure 8: Sainsbury’s 2012 annual report. (online) (viewed on 29/11/2012). Available from: http://www.jsainsbury.co.uk/media/649393/j_sainsbury_ara_2012.pdf

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Sainsbury's Investor Relations