Failed Asda merger ‘trigger’ for Sainsbury’s CEO Mike Coupe’s exit
The departure of Sainsbury’s boss Mike Coupe’s was sparked by the failure to merge the supermarket with rival Asda, analysts said today.
Industry experts said it was impossible to look beyond the failure of the Asda merger, and felt his resignation – announced today – was simply a matter of time.
Coupe was caught on camera singing “we’re in the money” after the potential Asda tie-up was announced, but the Competition and Markets authority blocked the deal in April last year.
Coupe will retire from the chief executive role in May before he is replaced in June with retail and operations boss Simon Roberts.
Asda merger
AJ Bell investment director Russ Mould said the “deal-hungry” Sainsbury’s boss will be remembered for the botched tie-up rather than his successes at Sainsbury’s.
“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,” Mould pointed out.
“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,” Mould added.
In a note to investors Shore Capital Markets analysts said Sainsbury’s was guilty of “materially over-extending the business’ capabilities in the eyes of the regulator with the proposed Asda merger”.
However, it added: “We have never faulted Mr Coupe for that merger attempt albeit we remain scathing at the Sainsbury non-executive directors and advisors that did not offer him better counsel for a deal we felt was doomed from the start.”
Richard Lim, chief executive at Retail Economics, said: “I don’t think it comes as a great surprise because of the failed merger of Asda, which will be one of the things that will be a mark on his legacy within Sainsbury’s.”
He added: “They invested a lot of time and money and resources into the potential merger and that would seem the low point of his career…whatever you think about the CMA, and they did seem to move the goalposts, ultimately he was the one overseeing the ambitious acquisition and he failed to accurately predict the outcome”.
Sainsbury’s Argos integration
Analysts referenced Coupe’s “immense ambitions” and “bold strategic decisions” following this morning’s announcement, with the 2016 acquisition of Argos singled out as a gamble that has largely paid off.
Lim said: “I would argue that he has done a very successful job in buying the Home Retail Group and Argos, integrating Argos and merging the food and non food and a really successful start installing Argos within Sainsbury’s stores.
“I think that model will continue to work for them.”
Mould added: “Argos is proving to have been a good deal and recent grocery trading has been fairly resilient despite intense market competition.”
Shore Capital Markets added that Coupe had effectively acquired and integrated the Argos business.
However, the supermarket said yesterday it would have to slash hundreds of management roles relating to the Argos integration.
Read more: Sainsbury’s to cut hundreds of roles in management shake-up
Sainsbury’s performance
Research by AJ Bell showed that Sainsbury’s has been the worst performer out of the major listed supermarket firms in the UK since Coupe took over as chief executive in 2014.
The company’s share price has fallen 31.3 per cent, compared to Tesco, which has dropped 13.6 per cent, and Morrisons, which has risen 7.2 per cent. Meanwhile, Ocado’s share price has soared 241.7 per cent since July 2014.
However, analysts said Coupe had kept the ship steady during a challenging time for supermarkets, as discount rivals such as Aldi and Lidl gobble up market share and grocers are forced to adapt to changing consumer behaviour.
Retail Economic’s Lim said: “I think the high point will probably be the fact that the grocery industry has been under immense structural change. He has kept Sainsbury’s on track in a very difficult and testing market.”
But Ask Traders analyst Nigel Frith said a new beginning was best for Sainsbury’s.
“A fresh start is needed after the previous year saw the failed merger between Sainsbury’s and Asda, of which Mike Coupe was the architect,” he said. That comes after five consecutive quarters of falling sales.
“Add into the mix hundreds of jobs being slashed at head office this week and it is clear to see this is certainly not Sainsbury’s finest moment,” he said.