Sainsbury's waves farewell to Coupe, and Burberry boosts guidance

“There was some cautious optimism on Wednesday morning despite the risks associated with the Chinese coronavirus continuing to simmer in the background,” says AJ Bell Investment Director Russ Mould.

“The FTSE 100 was higher as it took its cue from strong trading in Asia overnight, rather than the tepid performance in the US as investors weighed the first coronavirus case on American soil.

“Investors will be hoping this is not a repeat of the early noughties SARS virus which had a material impact on markets and global trade."

Sainsbury's

“Farewell, Mike Coupe, the deal-hungry Sainsbury’s boss who may unfortunately be remembered for his singing rather than retailing. He did the dance with Argos and Nectar but tripped up with attempts to marry Asda and partner with Danish retailer Netto in the UK.

“Just when you thought being caught on camera singing ‘we’re in the money’ was a low point, the Asda merger subsequently didn’t happen and Coupe was left scrabbling for a plan B.

“Despite such hiccups, it is fair to say that he wasn’t afraid of making some bold strategic decisions, even if perhaps he should have been paying closer attention to the day-to-day running of the business. Argos is proving to have been a good deal and recent grocery trading has been fairly resilient despite intense market competition.

“Coupe’s replacement is Simon Roberts who is currently the retail and operations director at Sainsbury’s. With a background at Marks & Spencer and Boots, he will be no stranger to the operational challenges facing large retailers.

“His agenda is likely to focus on getting more out of the existing business rather than finding new things to bolt on. Like most retailers, the priority is to have a superior digital offering and a top-notch supply chain. That is likely to involve investment in IT and logistics, something that sounds very similar to Marks & Spencer’s current situation.

“At an investor and analyst event last September, Coupe was blunt in saying there is low or no underlying growth in the UK grocery market. He said the business would have to adapt by being more competitive on price and having a better in-store and online experience.

“He also outlined plans to capitalise on the fact that Sainsbury’s has a more affluent customer base than many of its rivals by getting them to spend on areas such as beauty products. It would seem natural for Roberts to continue this strategy rather than trying something radically different.”

Burberry

“It is hard to square the market reaction with today’s trading update from luxury fashion brand Burberry.

“Revenue upgrades and a solid quarterly sales performance would typically see a company be rewarded rather than greeted with raspberries by the market.

“The strong run the shares have enjoyed in recent months may have prompted some profit taking and the reminder of how closely the company’s fortunes are tied to China may have provoked some nervousness given the deadly virus which is currently afflicting the country.

“The political disruption in Hong Kong is also having an impact too.

“Taking a longer term perspective the business will take encouragement from the positive response to the new collections introduced by creative officer Riccardo Tisci.

“This offers further vindication of the decision to appoint ex-Givenchy man Tisci to replace former star designer Christopher Bailey.

“Under CEO Marco Gobbetti the shift upmarket continues, the company continuing to chase the luxury status which would allow it to increase the price tag on its products and boost its profitability.

“The basics of retail are not being lost sight of either with the company working hard to get its distribution and marketing right, shuttering stores which don’t fit its refreshed vision while revamping others and opening new sites.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.