Simon Roberts will take over as J Sainsbury PLC’s (LON:SBRY) chief executive halfway through 2020 and faces a number of challenges in a group.

Firstly, after building up a history of unhappy appointments in the 1990s and into the new millennium with the reigns of David Sainsbury, Dino Adriano and Peter Davis, the grocer enjoyed a happy decade under Justin King and after handover to Mike Coupe saw some impressive and eye-catching deals until the attempted merger with Asda blew up.

READ: Sainsbury’s boss Mike Coupe steps down nine months after merger failure

Roberts, a 48-year-old who joined the supermarket group after 13 years at Boots following 15 years at Marks & Spencer, takes over Sainsbury as the highly competitive sector continues to evolve.

Late last year, Coupe and co updated their strategic plans at a capital markets day.

“The core outcomes of that event was a business that is going to focus upon sweating its existing assets, becoming a more joined up digital business,” sums up analyst Clive Black at Shore Capital.

No quick fixes

For several years now, the priority of all grocers has been to develop a top-quality digital offering and a top-notch supply chain.

Sainsbury’s had made “much progress” under Coupe on this front, says Black, delivering free cash generation in part from lowering costs, while Roberts’ history in operational management suggests this is a forte.

The purchase of Argos in 2016 was a key part in the logistical improvements, adding a much-admired ‘hub and spoke’ distribution network, but this business had been run by John Rogers, the former finance chief who had been the top-tipped replacement for Coupe before jumping ship for WPP in October.

Further cuts continue to be made to the cost base, with several hundred management roles getting the axe this week, on top of the thousands of shop staff given the chop as part of a restructuring announced in 2018.

“With capital discipline to the fore, including only modest new store development, the prime outcome of Sainsbury’s strategy is to lower net debt and improve the security and visibility of its dividend flows,” Black noted.

Shares going sideways

While growth opportunities will “of course” be pursued, Black said JS was “a distinctly sideways equity play for now”.

Indeed, although Coupe’s departure was expected, analysts at Jefferies were also cautious, saying the timing will “cause some concern” as it comes within four months of the group outlining a new strategic plan.

What’s more, at September’s investor event, Coupe bluntly outlined the distinct lack of underlying growth in the UK grocery market, emphasising how the business would have to adapt by being more competitive on price and having a better in-store and online experience.

It might be fair to say, said Russ Mould at AJ Bell, that Coupe “had an easy job and it seems unlikely that his successor Simon Roberts will be able to lay his hands on any quick fixes”.

“The UK grocery market is mature and highly competitive, so growth of any kind is going to be hard to come by.”

Mould added that the valuation discount at which Sainsbury’s shares trade at compared to Tesco and Morrisons on an earnings basis but at a premium as regards dividend yield, suggests investors “are not entirely sure about the strategic legacy that Mr Roberts is inheriting, especially as investors appear to be demanding a higher yield to compensate themselves for the perception that there are greater risks associated with the stock, and perhaps a period of calm on the corporate structure and focus on the day-to-day performance of the core business is what they are after”.