By James Davey
LONDON (Reuters) - Sainsbury's (L:SBRY) has picked retail and operations director Simon Roberts to succeed CEO Mike Coupe, the architect of the British supermarket group's failed bid for rival Asda who will step down in May after six years at the helm.
Roberts' task will be to grow earnings in the face of weakening consumer demand, Brexit, and the relentless march of German-owned discounters Aldi and Lidl, which continue to win market share from Britain's big four grocers - industry leader Tesco (L:TSCO), Sainsbury's, Asda and Morrisons (L:MRW).
On Jan. 10, Reuters reported that Roberts was the leading internal candidate to succeed Coupe.
Coupe, 59, has faced questions about his future since April when Britain's competition regulator blocked Sainsbury's attempt to take over Walmart-owned (N:WMT) Asda for 7.3 billion pounds ($9.5 billion) and become Britain's biggest retailer.
Sainsbury's shares were down 2.3% at 1135 GMT, extending losses over the last year to 25%.
All eyes will now be on whether Roberts, 48, will adapt a strategy set out by Coupe in September that was designed to show Sainsbury's could prosper on its own.
It focused on cost cutting, paying off debt, investment in technology and further integrating the Argos general merchandise business Sainsbury's purchased for 1.1 billion pounds in 2016.
Bernstein analyst Bruno Monteyne said that, as an insider signed-up to the current strategy, Roberts was unlikely to start with a bang and a major move to significantly cut prices.
"He will only do so if trading were to deteriorate materially. But he has limited time to make up his mind and make it part of the honeymoon clean up," he said.
Monteyne also said Roberts might review the future of Sainsbury's bank, which he said was unpopular with investors.
'DIFFICULT DECISION'
Roberts, who started his retail career at 16 and is a former executive of health and beauty retailer Boots, joined Sainsbury's in 2017.
"Simon has been extremely effective during his three years at Sainsbury’s, leading our store teams through great change in that time," said Chairman Martin Scicluna.
Roberts has re-built Sainsbury’s operating model for its over 1,400 supermarkets and convenience stores. He has invested in technology, implemented new leadership structures and standardised shop floor workers’ contracts. That has driven efficiencies and improved product availability.
"I am really excited about working together with our 178,000 colleagues to become one multi brand, multi channel business," said Roberts, whose base salary will be 875,000 pounds.
Sainsbury's said Coupe would remain a director from June 1 until the annual shareholders' meeting on July 2, at which point he will retire from the company he joined 15 years ago.
“This has been a very difficult decision for me personally," said Coupe, whose total remuneration was 3.9 million pounds in the 2018-19 year.
"There is never a good time to move on, but as we and the industry continue to evolve, I believe now is the right time for me to hand over to my successor."
Sainsbury's profit is forecast to fall in its 2019-20 financial year.
Coupe's purchase of Argos was generally regarded as a big success and, unlike Tesco and Morrisons, Sainsbury's did not sacrifice a chunk of profit margin with a major price cutting campaign in response to the discounters.
However, his tenure will likely be defined by the failure of the Asda transaction.
GAFFE
Coupe will also be remembered for one of the most notable corporate gaffes of recent times.
He made unwanted headlines around the world shortly after the Asda deal was announced in May 2018 when he was caught on camera singing "We're in the Money". He apologised, saying he had been trying to compose himself before a television interview.
Roberts' appointment means Britain's two biggest supermarket groups will be run by Boots alumni.
Ken Murphy, who will succeed Dave Lewis as CEO of Tesco in the summer, was earlier in his career joint chief operating officer at Boots UK & Ireland along with Roberts. Murphy and Roberts are friends.
Roberts also spent 15 years at clothing and food retailer Marks & Spencer (L:MKS), where he had roles in stores and operations.
“He’s got a great pedigree,” said someone who has worked with Roberts.
The person said Coupe and Lewis represented the last generation of "command and control" supermarket group CEOs.
“You’ve now got two guys whose real skill set isn’t about knowing the answer to everything, their skill sets are being good guys that people want to work with…bringing the best out of others."