Preliminary Results for the 52 weeks ended 2 March 2024
J Sainsbury Plc
Preliminary Results for the 52 weeks ended 2 March 2024
Strongest year of grocery performance driving momentum for Next Level Sainsbury’s strategy
The strength of our grocery performance over the last year, with record market share gains1 and volume growth accelerating every quarter, is a clear demonstration of the success of our Food First strategy. Over the last three years this strategy has enabled us to make consistent and balanced choices for customers, colleagues, suppliers and shareholders. Customers continue to respond to the investments we have made in value, innovation, availability and service and are doing more of their grocery shopping with Sainsbury’s2. Higher grocery volumes are feeding through to better profit leverage. This has driven profit and free cash flow results above the top end of our guidance range despite lower Financial Services profits and softer General Merchandise trading.
We are building on this momentum and the strength of our position in the UK grocery market through our Next Level Sainsbury’s strategy, announced in February. We expect to continue to outperform the grocery market and for this volume advantage to drive strong profit leverage in the year ahead, with retail underlying operating profit of between £1,010 million and £1,060 million, growth of between five per cent and ten per cent. Reflecting the strength of our balance sheet and our commitment to deliver enhanced shareholder returns, we announced in February that we will buy back £200 million of shares in 2024/25. We will commence the buyback programme tomorrow.
| Financial Summary | 2023/24 | 2022/23 | YoY |
| Business performance | |||
| Group sales (inc. VAT) | £36,337m | £35,157m | 3.4% |
| Retail sales (inc. VAT, excl. fuel) | £30,615m | £28,664m | 6.8% |
| Retail underlying operating profit | £966m | £926m | 4.3% |
| Financial services underlying operating profit | £29m | £46m | (37.0)% |
| Underlying profit before tax | £701m | £690m | 1.6% |
| Underlying basic earnings per share | 22.1p | 23.0p | (3.9)% |
| Proposed Full-year dividend per share | 13.1p | 13.1p | – |
| Net debt (inc. lease liabilities) | £(5,554)m | £(6,344)m | £790m |
| Statutory performance | |||
| Group revenue (excl. VAT, inc. fuel) | £32,700m | £31,491m | 3.8% |
| Profit before tax | £277m | £327m | (15.3)% |
| Profit after tax | £137m | £207m | (33.8)% |
| Basic earnings per share | 5.9p | 9.0p | (34.4)% |
Financial Highlights
| · | Retail sales (excl. fuel) up 6.8%. Grocery sales growth of 9.4%, General Merchandise sales up 1.2% (down 0.5% including the impact of the closure of Argos in the Republic of Ireland) and Clothing sales down 6.4%. Fuel sales down 14.3%, reflecting lower input prices. Statutory sales up 3.8% |
| · | Retail underlying operating profit of £966 million, up 4.3%, with volume-driven grocery profit growth and continued strong delivery of cost savings partially offset by weaker General Merchandise profits |
| · | Financial Services underlying operating profit of £29 million versus £46 million last year, reflecting the impact of higher funding costs from increased interest rates not being fully passed on to customers, as previously guided |
| · | Underlying profit before tax of £701 million, up 1.6% |
| · | Statutory profit before tax of £277 million, down 15.3%. Non-underlying items predominantly relate to the restructuring of the Financial Services division |
| · | Retail free cashflow of £639 million, broadly flat year-on-year |
| · | Net debt including leases of £5,554 million, £790 million lower, reflecting strong cash generation and a £372 million net reduction as a result of the Highbury and Dragon property transaction3. Net debt to EBITDA 2.6x |
| · | Proposed final dividend of 9.2 pence, full year dividend of 13.1 pence, in line with last year |
2024/25 Outlook
| · | We are confident of delivering strong profit growth in the year ahead. We expect to continue to grow grocery volumes ahead of the market, driving profit leverage. Combined with continued growth in Nectar profit contribution, a resilient Argos profit performance and continued strong cost saving delivery, we expect this to deliver retail underlying operating profit of between £1,010 million and £1,060 million, growth of between five per cent and ten per cent |
| · | Our strong grocery momentum has continued into the new financial year and while we will face tougher comparatives, we expect to continue to generate volume growth and outperform the market. Against last year’s cool and wet Summer, we additionally expect a sales benefit across the business from more normal seasonal weather |
| · | We expect a lower profit contribution from Financial Services this year as we prepare to change the scope of the business. We expect a continued healthy profit contribution from the commission-based products we will retain. However, profits from our core banking products will continue to be impacted by higher funding costs and will additionally be impacted by preparations for phased withdrawal from these areas. Therefore we expect these products to be loss-making and hence a net Financial Services contribution of between break even and £15 million |
| · | We expect to generate Retail free cash flow of at least £500 million |
Simon Roberts, Chief Executive of J Sainsbury plc, said:
“We said we’d put food back at the heart of Sainsbury’s and that’s what we’ve done. Our food business is firing on all cylinders. We have the best combination of value and quality in the market and that’s winning us customers from all our key competitors, driving consistent volume market share growth as more customers choose us for their weekly shop and all their special occasions.
“We’ve done that by relentlessly investing in price; £780 million over the past three years. We know it’s still tough out there for so many households and we’re doing all we can to save money right across our business to keep prices low – we have reduced 4,000 products over the last year alone. Nectar Prices has also been a game changer for customers, saving them £12 on a typical £80 shop. And we’re not compromising on quality: we’ve doubled our rate of innovation and Taste the Difference is performing especially well.
“As we embark on our Next Level Sainsbury’s strategy, we’ll continue to make deliberate, balanced choices to support our customers, colleagues, communities and farmers. I want to say a big thank you to all our colleagues and suppliers for all their hard work in delivering another record year. The business has real momentum and we’re excited by our goal of making good food joyful, accessible and affordable for everyone, every day.”