Sainsbury's Coupe needs to deliver his lines better as City cheers opening act of his revival plan

In the wake of the failure to merge with Asda, the supermarket's CEO says he can cut costs by £500m with up to 70 Argos outlets to go from the high street

Sainsbury's boss Mike Coupe who has unveiled plans to cut costs by £500m over five years (Reuters)

“A Shakespearian tragedy of Wagnerian length,” was how broker Shore Capital once described covering Sainsbury’s.

It trotted out that line again to greet the grocer's latest update and revival plan. Very amusing, but perhaps a bit mean. The group, after all, had some good times under Justin King.

But, then, even tragedies have the occasional lighter moment. There just hasn’t been a lot of light at Sainsbury's in recent times.

From the wreckage of his attempt to merge with Asda, CEO Mike Coupe needed to come up with something.

His script was unveiled ahead of a "capital markets day" designed to woo the City, alongside a trading update revealing that like for like sales (which excludes new space) fell again, this time by 0.2 per cent.

Not a big fall, it’s true, and some parts of the business are growing, but it’s still an overall fall.

Can Coupe (finally) reverse that and raise a smile among his audience at a time when the group has been flirting with following M&S out of the FTSE 100?

The early performance of the shares tells you the City’s critics’ were mostly a shade warmer than those at Shore. It’s an audience that’s always pleased with cost cuts and Coupe is promising a lot of them. Some £500m over five years.

Up to 70 Argos outlets are set to vanish from the High Street, with 80 new ones opening up as concessions in Sainsbury’s stores. This cuts rent, and makes better use of existing space.

There will be 110 new convenience outlets opening, offset by 30-40 closures. The group also plans to build 10 additional superstores. They aren’t very fashionable these days but the Sainsbury’s has land and planning permissions so it might as well make use of it where it thinks it can make money. The flip side is that there will be at least as many closures.

Elsewhere Sainsbury’s Bank is following Tesco out of the mortgage market, hardly surprising given the difficult smaller players face when it comes to making money in an ultra competitive home loan market, with a long term aim of making a more modest financial services offering throw off capital rather than eating it.

If all this is what’s possible, you do have to wonder (once again) quite why Coupe spent so much time with that spectacularly ill conceived Asda deal. The Competition & Markets Authority was cast in the role of Iago because someone had to kill it.

Now that corpse is six feet under, can Coupe turn out one of those cheerful West End musicals?

This is a CEO that likes a deal but what he needs to do now is prove he can produce improvement in the day to day business.

Don’t get too excited by the polite applause this opening act has been greeted with. He still needs to deliver his lines better over the course of a play.