J Sainsbury PLC (LSE:SBRY) shares slumped around 5% on Wednesday after the group’s new strategy update left some analysts underwhelmed due to its lack of detail.
Under the plan, Sainsbury is aiming to cut costs by £1 billion within three years, while growing its food volumes.
“It’s not hard to dream up such a wish list to improve the company’s fortunes,” said Russ Mould, investment director at AJ Bell.
“Achieving the goal is another matter and it will cost money – something the market typically hates.”
Some £200 million was also targeted to be returned to investors through a share buyback scheme, while management is expected to implement a “progressive dividend policy”.
However, analysts at Morgan Stanley (NYSE:MS) were left underwhelmed after the figure came in lower than their £250 million forecast.
"Overall putting it all together – we think that the buyback and the FCF/profitability guide may be a touch lower vs market expectations based on our conversations with investors," experts at the US bank said.
Questions were also raised about the group's "price investment plans", with Morgan Stanley (NYSE:MS) pointing out how "headline figures don't immediately suggest an upgrade to our free cash flow/EBIT estimates."
Sainsbury also announced new changes to how its Nectar card operates, with plans to roll it out to additional digital platforms and into payment solutions.
Mould added: “Offering cheaper prices to customers using the Nectar loyalty card is a carbon copy of what Tesco has been doing with its Clubcard, and Co-op is now also doing the same with its membership scheme.
“Nectar has been an underutilised asset for years and the loyalty scheme, until recently, has been fading into oblivion.”
While Mould believes it makes sense to extract as much value out of Nectar as possible, he noted how “there is an argument this should have been done years ago.”
Management was unable to rule out job losses as part of the new strategy, and although the market tends to favour workforce reductions, shares have traded lower throughout the day.
Sainsbury’s, which employs around 150,000 workers, refused to provide an update on the effects of these changes.
In the company’s update, it stated it would be investing in technology to help implement efficiencies which could help it towards its cost-cutting goal.
A Sainsbury's spokesperson said: "Looking after our people will always be a key priority for us - as demonstrated by our recent investment of £200m in providing an industry leading pay rise."