Valuing the difference at Sainsbury’s

John Rogers, chief financial officer of J Sainsbury

By Michelle Perry | CFO UK | Published 14:54, 13 July 11

SainsburyDespite having come to finance by a rather unusual route – his career began as a missile engineer for British Aerospace – it has taken John Rogers little over five years to rise to chief financial officer of J Sainsbury, the UK’s second-largest supermarket chain and a FTSE 100 business.

“I remember having a conversation with [former CFO] Darren Shapland four years ago and I was saying ‘I don’t envy you in your job. It’s a tough job, isn’t it?’ and he turned round to me and said: ‘I see you as being my successor in the business.’ So that came as a bit of a shock to me,” Rogers explains in his first interview since taking up the CFO post in July 2010.

At that point he indulged himself in the possibility, concluding that he would indeed cherish the opportunity to become CFO. In terms of attaining the position Rogers was well placed. At the time he was in charge of property – no small responsibility for today’s supermarket – having moved across from finance so his knowledge of the business was broad and deep.

Moreover clearly Sainsbury’s is persuaded by the current trend to nurture talent from within the business, and in Rogers the board found the perfect fit. Prior to his arrival at Sainsbury’s in 2005, Rogers had been group finance director at Hanover Acceptances, a holding company for four operating companies in the real estate, manufacturing, agribusiness, and venture capital. His years as a consultant at Monitor Group and Accenture had also exposed him to different sized businesses across industry sectors with their myriad challenges to overcome.

John Rogers, CFO of Sainsbury’s“I didn’t come at it [finance profession] from a finance perspective. It was about business,” he explains.

Under Rogers’ wing as finance chief, not only has Sainsbury’s recently outperformed market expectations but the supermarket has also crushed previous forecasts that brands such as Sainsbury’s and Waitrose would suffer more than lower-cost rivals such as Tesco or Somerfield.

Sainsbury’s has reported sales figures for the three months to June 2011 that comfortably beat those of Tesco. In June, like-for-like sales across the Sainsbury group, excluding fuel, rose by 1.9 percent in the 12 weeks to 11 June, beating Tesco’s 1 percent rise. Underlying sales, excluding VAT and fuel, were also around 1 percent higher while Tesco reported lower underlying sales at 0.1 percent.

Despite these clear successes, Rogers – who is relatively young for a FTSE 100 CFO at 43 years old – shows no trace of smugness. On the contrary he is cautious about the supermarket’s immediate prospects. Like his boss, CEO Justin King, he refers to recent sales figures as merely a “bounce” in what is “a tough environment”.

“The priorities always remain the same. We’ve been managing costs and tightening the business as we go. I guess it’s been a theme of the market over the past two to three years. And that theme has been reinforced with the challenging times and re-emphasised the need to continue with those cost savings in the business,” he says.

Rogers is committed to delivering cost savings annually to the tune of between £70 and £100 million to offset inflation rises. Without these savings the CFO says Sainsbury’s wouldn’t be able to compete in the highly competitive marketplace.

The strategy isn’t in danger of changing in the near future either. Rogers says he doesn’t expect to see a “marked improvement in the next 12 months” in the economy and so the group is “preparing to batten down the hatches over the next 12 months and manage costs carefully”.

Rogers says that it is almost harder now, given the lack of “visibility of the market” over the past few months, to offer up a considered guess as to when the economy and consumer confidence will improve. “If you look at the market confidence data it’s probably in the worst position we’ve been in for 15 years or so,” he says.

Despite the success of the group’s cost-cutting measures, he wants his finance team to be remembered as much for adding real value and for having “a real input to play in commercial decision-making”. That already happens at board level but the CFO wants to ensure the aim across the finance function and is currently working towards that goal.

“We have been doing a lot of work in our training and commercial areas where we are looking at our entire end-to-end processes with our suppliers to help deliver cost savings across the board. Finance has played a broader role in facilitating those savings and that’s the kind of role that I think finance should play a role in,” says Rogers.

The actual adding up of the numbers and preparation should become a simpler exercise, he says, and one that is largely governed and driven by technology. “It should almost add itself up and finance should play a broad role in the business.”

That is “a nice-to-have” he says, admitting that finance is not there yet, but in five years’ time it is where the CFO hopes to position his finance function, which currently numbers 400 members of staff.

The other area of opportunity for finance is in terms of management information. Like many businesses Sainsbury’s suffers from “far too much data”.

“The challenge is how to cut and slice that data. We’d like to be in a place where that data is churned out by the system. But that relies on systems change. That’s something we will try to effect over the next three to five years,” he explains.

One year on

Rogers completes his first year as Sainsbury’s CFO on 18 July 2011 and despite taking up the position at a time of great economic uncertainty, he appears comfortable in the very public role. Indeed, he says he relishes the chance to take on a few analysts.

“As a new CFO the big events are the presentations to the City and it was a great experience to go through. I’ve done interims and a set of prelims. The build-up to those you spend a lot of time preparing, and going through those events I find a fun experience,” he enthuses.

“I like the challenge that analysts often present. There are a few analysts that have a particular perspective on things so it’s good to get that challenge. They present certain cases and it’s good to challenge that.”

Rogers has continued to deliver top-line growth roughly in line with the past four years of around 7 to 8 percent, although he says it’ll be more of a challenge to reach the goal this year. The group posted sales of £21.1 billion for the year to 19 March, up 6 percent on the previous year.

“The market will grow slower, but one hopes that that growth will return in the future,” he says.

Despite a potentially wobbly 12 months ahead, the supermarket’s prospects don’t keep Rogers awake. In fact, there is little that disturbs his rest, he says, because while the business is in a difficult trading environment, it “is in really good shape now”.

When you are working a 14-hour day five days a week, sleep should be the one aspect of private life that remains worry-free. Rogers is unfazed by the long hours.

“We talk a lot about work/life balance and that’s important, but I wouldn’t do the job I do unless I loved it so there wouldn’t be any point spending my entire waking week involved in the job if I didn’t enjoy it. It sounds clichéd but I genuinely think it’s a privilege to come to a job in the morning and you absolutely love what you do. Of course there will always be days that don’t go according to plan,” he chuckles.

Even the youngest of Rogers’ three children are accustomed to his midweek absence. “The other day my youngest son, who’s nine, said on Sunday evening ‘ok I’ll see you next Friday’. I think he was trying to be funny!”

For now Rogers is focused on growth and expansion. In fact if anything were to keep him awake at night it would be this: “The biggest concern that I would have is that we don’t capitalise on that opportunity”.

While many businesses are looking overseas for growth opportunities Rogers says Sainsbury’s focus, for now, is firmly on the UK. “We can see good growth in the UK over the next five years and that’s where our priorities are. There may well come a point where growth opportunities internationally look more appealing but that may be in a 10-year horizon.”

The strategy here is two-pronged and on two levels: food and non-food sales both online and in stores. A significant £600 million of sales is online, growing at a rate of over 20 percent per annum.

“We’re always looking at opportunities that would help accelerate our plans but we’re not dependent on acquisitions to deliver our existing plans,” he says, not ruling out the possibility of a future acquisition to speed up growth.

With the group’s focus firmly on the UK it’s not to say the group is missing a trick overseas as Tesco carves up China for itself. Sainsbury’s has a small team on the ground in China which is looking for opportunities.

“It’s very much at the stage of dipping our toe in the water. I don’t see us making a decision in that respect soon. It takes time to understand a market. There are other areas of the world that interest us,” he adds rather cryptically.

CV: John Rogers

1997–1999: Strategy Consultant, Monitor Group
1999–2005: Group Finance Director, Hanover Acceptances
2005–2007: Director of Corporate Finance, J Sainsbury
2007–2008: Director of Group Finance, J Sainsbury
2008–2010: Property Director, J Sainsbury
2010–present: Chief Financial Officer and board member, J Sainsbury
Click and Collect

Sainsbury’s non-food online offering is a division the company wants to grow aggressively, according to CFO John Rogers. In May Sainsbury’s announced a rapid expansion of its Click and Collect service, designed to boost sales of non-food items such as homeware and electrical goods via its website.

The service, launched in July 2009, was to be expanded to 400 stores by June, and more than 800 by Christmas. Available at local convenience stores and large supermarkets, the aim is to achieve 45 percent of total sales for the non-food division by 2020, up from about the current 25 percent.

“If you believe that people will always go to a store and do a food shop – I believe that’s the case – what a great synergistic model because at the same time as doing that shop they can pick up their non-food items,” the CFO says.

The biggest obstacle to non-food online shopping, says Rogers, is always the last mile in terms of making sure the customer is at home or if they don’t like the purchase and want to return it. “This is often the most expensive part of managing that process,” he explains.

“If you can cut out that last mile by fulfilling it through your store, which customers seem to really engage with – hence the 30-40 percent of customers picking up items in store – that’s subtly different from a lot of other stores’ online click and collect, offering where you have to make a separate trip somewhere that doesn’t have a big car park,” he argues.

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