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PASSION, PEOPLE, PRODUCT PRODUCT AND PRICE BEST AT FRESH
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Chairman's statement The process of reinventing Safeway really accelerated from November onwards when Carlos Criado-Perez became Chief Executive. Our overriding goal - sustained, profitable sales growth - remains unchanged. But we have radically reshaped the strategy for achieving it and completely reinvigorated our business culture. This is what I mean by 'reinventing' Safeway. We are a very different and much stronger business now than we were a year ago and by this time next year we will be even better. The benefits of our new strategy started to come through towards the end of our first half and became even more evident in the second half. We achieved strong like-for-like sales growth of 5.9% in the second half, making 3.3% for the year. With disinflation of 1.8%, volume was up by 5.1% over the year and by a remarkable 9.6% in the second half. For the last eight months since the early Autumn, our sales growth was consistently ahead of the industry average. We have achieved this growth by cutting our prices through the medium of an aggressive promotional programme, backed by local marketing. As a result, we have recruited 750,000 new customers. Implementing the first phase of our new strategy, however, while discontinuing the old one, required heavy investment and considerable management effort. This reduced our profit before property and tax to £245 million and we have recommended a reduced final dividend in line with our intention, announced with the interim results, to restore cover to a more appropriate level. Our task now is to continue to build our customer base and retain the loyalty of new customers by continuing to improve our product ranges, availability and customer service. These new and loyal customers should then become the basis for renewed profit and dividend growth this year. The Board
Colin Smith resigned from the Board in November. Colin served on the Board for nearly 16 years and from November 1993 as Chief Executive. He made a major contribution to the development of our business, particularly by leading the repositioning of the Safeway brand in the mid-1990s. We wish him well. Roger Partington resigned from the Board in July, having served as an executive director since October 1997. Roger made a notable contribution to the evolution of our marketing strategy. Since the end of the year, Gordon Wotherspoon, our Property and Development Director, has also resigned after 28 years' service with the Company. We are all very appreciative of Gordon's achievement in creating our superstore portfolio.
Dr Neville Bain retired from the Board in January, having served as a non-executive director since 1993 and as chairman of the Board's Audit Committee. I thank him most warmly for his contribution. In August we appointed two new non-executive directors to our Board. Lisa Gernon, then Executive President, Commercial for Cable & Wireless, and Peter Foy, a non-executive director of P & O, PepsiCo and Omnicom. Both have made important contributions to our discussions since they joined us. Our Sector The UK consumer has never had better value for money from the food industry than that which the major retailers are currently delivering. The reverse side of this coin, however, is that the combination of falling retail and wholesale prices and the unremitting upward drift of Sterling against the Euro has made life very difficult for many farmers, growers and small suppliers generally. There are no easy solutions to the problems these market conditions have created and we will continue to work with other retailers, trade bodies and the Ministry of Agriculture to find ways of helping smaller suppliers to compete successfully and build a profitable business. We strongly support the Code of Best Practice developed by the leading food retailers under the auspices of the Institute of Grocery Distribution. The Code will build on the best of today's working practices and, through it, the leading retailers will seek to ensure that the day-to-day conduct of business from one end of the supply chain to the other refle c t s consistently high standards of behaviour. Industry Outlook
David Webster 24 May 2000 |
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First, Carlos Criado-Perez was appointed to the Board as Chief Operating Officer in August, becoming Chief Executive in November. Since his arrival he has proved time and again that he is a first-class international retailer with outstanding leadership skills.
We welcomed two long-serving colleagues to the Board in November - Lawrence Christensen CBE, who is responsible for Supply and Richard Williams, who is responsible for Group Services, including Information Technology, Human Resources and Property.