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Coupe’s critics would be wrong to cheer his Sainsbury’s check-out

The critics are emphatic. Mike Coupe, the outgoing Sainsbury’s chief executive, has failed.

Shares of the UK’s second-largest shareholder have fallen by a third during his tenure, they note, while management time – and £50m in advisory fees – were wasted in the ill-judged pursuit of a merger with Asda.

To cap it all he was embarrassed when, on the day the merger was announced, he was caught singing ‘We’re In The Money’ to himself while waiting to begin a ‘down-the-line’ interview with ITV.

:: Sainsbury’s boss Mike Coupe to retire

Longer term, however, the history books will be kinder.

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Why? Mainly because Mr Coupe’s contribution must be assessed in the round – not just his six years as chief executive.

Before becoming CEO, Mr Coupe had played a critical role in reviving Sainsbury’s with Justin King, his more-garlanded predecessor.

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Recruited as trading director in May 2004, just weeks after Mr King himself had joined Sainsbury’s, he had a strong reputation from spells at Tesco, Asda and, latterly, Iceland.

Image: Mr Coupe was instrumental in focusing on value ranges at Sainsbury’s

Mr Coupe’s first priority was to improve availability at Sainsbury’s, an area in which it underperformed not only Tesco and Asda but also some of the sector’s laggards, such as Safeway and Somerfield.

Availability rapidly improved and Sainsbury’s shoppers suddenly found that, where previously they had been confronted by empty supermarket shelves and having to leave a store without all the items on their grocery list, now they were not.

At the same time, Mr Coupe sought quickly to raise competitiveness on price, sending a marker out with price cuts on some 6,000 different lines. Industry analysts were sceptical about launching a price war against deep-pocketed rivals like Tesco and Asda but the strategy paid off.

Sainsbury’s began growing sales on a like-for-like basis for the first time in years.

Things could easily have gone off-course as Britain’s shoppers saw their spending power eroded by the global financial crisis. Sainsbury’s, industry analysts scoffed, sat uncomfortably in the middle ground of the UK grocery market, trying to compete with the likes of Waitrose and Marks & Spencer on quality and with Tesco and Asda on price, but failing in both.

Mr King and Mr Coupe begged to differ. The pair launched a ‘Basics’ range to compete on the price of essentials while overhauling its ‘Taste the Difference’ range. It worked.

Image: Mike Coupe was named Justin King’s successor in 2014

Mr Coupe was also entrusted with taking the fight to Tesco and Asda in other ways, for example, overseeing the launch of non-food items on the Sainsbury’s website.

Then, in 2011, Sainsbury’s launched Brand Match – a promotion under which it matched Tesco and Asda on more than 12,000 branded grocery lines. Shoppers spending more than £20 and buying at least one branded line were immediately issued at the till with a voucher if the same item was more expensive than at Tesco or Asda. The scheme, devised by both men, was derided as risky but, again, Sainsbury’s confounded its critics.

The best evidence it was working came when, in January 2012, Tesco issued its first profits warning in living memory. It was no surprise when, in January 2014, Mr Coupe was named as Mr King’s successor.

While he was seen as offering continuity with Mr King, with whom he had worked so closely, the professorial-looking Mr Coupe soon emerged as someone prepared to take surprisingly bold bets.

The £1.4bn acquisition of Argos, in 2016, is generally regarded as a success.

Its integration into the group means that Sainsbury’s now derives a fifth of its sales from online. It means Sainsbury’s also now has 18% of the UK digital gaming market and more than 30% of the UK toy market.

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By integrating Argos concessions into larger Sainsbury’s stores, Mr Coupe has also found a way of shedding onerous Argos store leases while using surplus space in larger supermarkets, something that could have proved problematic.

Argos has been successfully integrated in Sainsbury’s and that is an achievement for which Mr Coupe’s successors will be grateful.

And so to the failed merger attempt with Asda.

Here, Mr Coupe can claim an element of bad luck: the Competition & Markets Authority’s approval of Tesco’s £3.6bn takeover of wholesaler Booker in 2016, to the amazement of both the City and the grocery industry, raised false hope that the authorities were starting to look at the world differently in the wake of Amazon’s inexorable rise.

Image: Mr Coupe was widely accused of taking his eye off the ball while chasing the Asda tie-up

Unfortunately for him, the proposed Asda merger coincided with new and more interventionist leadership at the CMA in the shape of Andrew Tyrie, previously a formidable chairman of the Treasury Select Committee.

The deal was blocked.

Yet some of the opprobrium since hurled at Mr Coupe seems harsh.

As Clive Black, the retail analyst at broker Shore Capital – and a man who knows more about these things than most – observed today: “We have never faulted Mr Coupe for that merger attempt, albeit we remain scathing at the Sainsbury non-executive directors and advisers that did not offer him better counsel for a deal we felt was doomed from the start.

“We sincerely hope that Mr Coupe leaves Sainsbury with pride at [his] achievements and… also hope a balanced assessment of his time [as chief executive] emerges.”

Sainsbury’s is not a business in bad shape. For a start, his successor Simon Roberts comes from within the company, which is always a good sign. The company has a fine platform for online growth in Argos. And Mr Coupe has also invested shrewdly in convenience stores – the fastest area of growth in grocery retailing.

In the short term, though, the main challenge will be to sharpen up competitiveness – which, critics say, was lost when management was distracted with the Asda deal. Expect prices to start coming down too and, maybe, a dramatic ‘reset’ of operating margins.

SOURCE : https://news.sky.com/story/coupes-critics-would-be-wrong-to-cheer-his-sainsburys-check-out-11915065

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