Where does Sainsbury’s go next?

After a blocked merger with Asda, CEO Mike Coupe’s resignation leaves the supermarket at a crossroads, writes James Moore

Mike Coupe has announced he is stepping down as CEO (PA)

Just a day after Sainsbury’s CEO Mike Coupe unveiled plans for hundreds of job cuts, he cut his own. There had been questions about the 59-year-old’s future ever since the fairly disastrous attempt to pull off a £7bn merger with Asda that just about everyone outside those involved could see was doomed from the start.

With his focus back where it should have been, Sainsbury’s core grocery business has been showing some signs of life.

Christmas was better than expected and researcher Kantar’s quarterly survey of the market showed Sainsbury’s losing market share to Aldi and Lidl at a notably slower rate than rivals.

But his other foray into deal-making, the £1.4bn acquisition of Argos, looked less cheery.

The job losses he announced came through further efforts to integrate it into the Sainsbury’s fold. His legacy will look a lot better if his 48-year-old successor Simon Roberts, currently retail and operations director, can make it fly again.

As it is, that legacy is mixed indeed. While the market gave Coupe a tip of the hat by marking the shares down on the announcement, they’re still deep under water compared with where they were when he joined and trade at a discount to Tesco and Morrisons on an earnings basis.

The dividend yield is better than either, something Coupe’s supporters will point to, but profits declined during his tenure and sales growth came off while he was trying to convince the Competition & Markets Authority and the rest of the world that creating a monster by combining Britain’s number two and number three grocers was something other than a terrible idea.

Coupe was left with egg all over his face at the start of that process when he was caught on camera singing “We’re in the Money” before a TV interview to plug the deal on the day of its announcement. It stayed there.

Still, while he’s being treated as a “good leaver”, Coupe won’t be personally as in the money as he could have been having agreed to waive his entitlement to bonus and share awards this year.

Earlier this week, an Edelman’s Trust Barometer showed Britons’ faith in business to be at a low ebb. The greed of British CEOs has played a major part in that. Against that backdrop, this is the right decision on his part, all the more so given those job losses.

Roberts will have to work hard to justify his bonuses, share awards and other sweeties on top of his £875,000 annual salary.

The ultra-competitive grocery market isn’t growing, nor is the UK economy (much) and then there’s Brexit.

Shareholders will likely be reluctant to endorse Coupe-style adventures into the M&A market to address the issue of growth, or rather the lack of it, which means he’ll have to make the best of what he’s got.

It didn’t hurt that Which? this week crowned Sainsbury’s the cheapest UK supermarket, based on a survey of branded grocery items, although Aldi and Lidl weren’t included

With a relatively affluent customer base when compared with some of his rivals, there is scope for Roberts, a former Boots executive, to maybe squeeze more from the business by tempting them with new lines.

As well as focusing on efficiency and the supply chain, he could also win some brownie points by greening up Sainsbury’s offer.

Whatever he does, he’ll need to do it quickly. He’s taking on one of the tougher jobs in the FTSE 100 and just keeping Sainsbury’s in that index will be no small achievement given the challenges it faces.