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“How Sainsbury’s Performed: Interim Results for 28 Weeks”

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“How Sainsbury’s Performed: Interim Results for 28 Weeks”

Our strategic investments in value, innovation, and service have yielded significant volume and market share growth. We have successfully gained market share and volume from our competitors in the grocery sector, consistently outperforming the market in the first half of the year. This achievement is the outcome of our focused investments in our food business over the past three years, enhancing value, innovation, and customer service. Customers are increasingly choosing to shop with us, recognizing our commitment to delivering not only great quality and service but also consistent value.

We are maintaining a balanced approach, investing in improving customer experience and supporting our employees. As a result of our strong volume performance, we anticipate an underlying profit before tax for the fiscal year 2023/24 in the range of £670 million to £700 million, which is in the upper half of our previous guidance. Additionally, we expect retail free cash flow to be at least £600 million, surpassing our previous guidance of at least £500 million.

Looking ahead to the next phase of our progress and building on the success of our “Food First” strategy, we will be hosting a Strategy Update on February 7, 2024.

Financial Highlights

  • Grocery sales increased by 10.1%, with volume growth in both quarters resulting in record market share gains and consistent market outperformance.
  • General Merchandise sales grew by 1.1%, despite challenging weather comparatives during the summer (up 2.5% when excluding the impact of the closure of Argos in the Republic of Ireland).
  • Clothing sales decreased by 8.4%, reflecting a disciplined trading approach in a seasonally weak and promotion-driven market.
  • Statutory Group sales increased by 3.5%, with fuel sales declining by 19.6% due to lower input prices. Like-for-like Retail sales (excluding fuel) rose by 8.4%.
  • Retail operating profit reached £485 million, up 2%, driven by strong grocery profit growth, increased delivery of cost savings through the “Save to Invest” program, and partially offset by the impact of weaker seasonal sales on General Merchandise profits.
  • Financial Services operating profit was £13 million, down from £19 million the previous year, primarily due to a reduction in net interest margins and higher funding costs not being fully passed on through higher lending costs.
  • Underlying profit before tax remained flat at £340 million year-on-year.
  • Underlying earnings per share stood at 10.5 pence, down 6% due to the higher rate of corporation tax.
  • Statutory profit before tax amounted to £275 million, down 27%, mainly reflecting non-cash movements and one-off income from legal settlements in the previous year. Statutory earnings per share were 6.6 pence, down 46%.
  • Retail free cash flow was £520 million, driven by robust growth in grocery sales and seasonal benefits in the first half of the year.
  • Net debt, including leases, decreased by £701 million to £5,643 million, reflecting strong cash generation and a £1,042 million reduction in lease debt following the Highbury & Dragon property transaction. Net debt, excluding leases, increased by £375 million to £231 million, mainly due to the cash costs associated with funding the consideration for the transaction.
  • The interim dividend remained unchanged at 3.9 pence year-on-year, in line with our policy of paying 30% of the prior full-year dividend per share.

Simon Roberts, Chief Executive of J Sainsbury plc, stated: “Food is firmly back at the heart of Sainsbury’s. We’ve never been more competitive on price, and our focus on value, innovation, and service is giving more customers more reasons to shop with us.

“We know people are still finding things tough, and we’re working harder than ever to reduce our costs, putting money back into our customers’ pockets through lower prices on the products they buy most often. I’m pleased to say food inflation is coming down, and we are passing savings on to customers. We’ve rolled out Nectar Prices to over 6,000 products, and the vast majority of customers are now shopping with Nectar, saving over £450 million since April.

“We have extended increased colleague discount and free food during shifts indefinitely, and thanks to the hard work across our entire team, we’re delivering leading customer service and availability. I want to thank all of my colleagues for their fantastic efforts.

“We’re ready to give customers at Sainsbury’s and Argos everything they want to have a brilliant Christmas. We’re helping everyone to treat themselves with fantastic value and more delicious new food than ever before. As we head into this key trading period, we are encouraged by our strong momentum and remain fully focused on delivering for customers and shareholders.”

Strategic Highlights

Food First: Our relentless focus on consistently offering good value, exciting products, and excellent service has resulted in record market share gains. We are currently the most competitive we have ever been, with customers’ perception of our value consistently improving. Our targeted investments in keeping prices low have led to increased customer loyalty and higher volumes, particularly in core product categories. We have successfully launched Nectar Prices, saving customers over £450 million since its inception.

Supporting our “Good food for all of us” brand promise, we continue to be bold and ambitious in innovation, launching 600 new products in the first half of the year and outperforming the market and competitors in Premium Own Label volume growth, driven in part by our Summer innovation.

We have also invested significantly in our colleagues, extending increased colleague discounts and free food during shifts indefinitely, resulting in higher colleague engagement scores and delivering leading customer service.

Brands that Deliver: Our focus remains on improving the efficiency and resilience of our brands, supporting strong customer offers and investments in our food business.

Nectar participation has significantly increased, with 14 million Nectar Digital Collectors, driven by the rapid rollout of Nectar Prices. This will support the growth of Nectar360, on track to deliver £90 million of additional profit by March 2026.

Argos profitability has improved, thanks to lower fixed costs, an expanded product range, and more convenient points for customers to collect products. Argos sales were resilient, with continuing market share gains, strong consumer electronics sales, and activity celebrating Argos’s 50th anniversary.

Tu maintained a disciplined trading approach, with lower sales but stable full-price sales participation, protecting profitability.

Financial Services profits declined due to net interest margin compression and customer behavior, resulting in lower profits for the full year.

Save to Invest: We remain on track to deliver £1.3 billion of cost savings by March 2024, future-proofing our business with a structurally lower cost base and supporting investments in our customer proposition. We have delivered £1.1 billion of cost savings over the last two and a half years and continue to make progress on key structural change projects.

Plan for Better: We are making strides in our Plan for Better, investing in sustainable supply chains and making progress against targets, including plastic packaging and carbon reduction. Our new Taste the Difference Aberdeen Angus beef range has a 25% lower carbon footprint compared to industry standards. We have also received recognition for our commitment to sourcing from certified sustainable fisheries and aquaculture, winning accolades from the Marine Stewardship Council and Aquaculture Stewardship Council.

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