Sainsbury's Investor Relations Report

of 23

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?

of 23

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.

of 23

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.

of 23

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 two-

way 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)

of 23

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.

of 23

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.

of 23

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.

of 23

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 well-

defined 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.

of 23

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.

of 23

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

of 23

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

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

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

of 23

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

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.

of 23

Appendix 1

Sainsbury’s Stakeholders Map

Sainsbury's

Regulators

Local councils

Employess

Unions

Suppliers

Press

Government

AcFvists

CommuniFes

Government

CompeFtors

Owners

Customers

Fiance analysts

Board of directors

Shareholders

Trade associaFons

Market agencies

of 23

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

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.

of 23

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.

of 23

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.

of 23

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-through-video/

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-campaign-ruled-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-red-tractor/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.just-style.com/analysis/sainsburys-expects-little-improvement-in-consumer-confidence_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

of 23

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-price-chart/#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-strategy-objectives/

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.j-sainsbury.co.uk/media/649393/j_sainsbury_ara_2012.pdf

Sainsbury's Investor Relations Report

Documents

Transcript of Sainsbury's Investor Relations Report