J Sainsbury Plc
Preliminary Results for the 52 weeks ended 4 March 2023
Delivering greater value for customers, colleagues, communities and shareholders
Two years into our Food First plan, we are a fundamentally stronger business. We have made bold choices to reduce costs, make Argos and Tu more profitable and resilient, grow profits at Nectar and strengthen our balance sheet. We have reinvested the benefits in our food business, prioritising value, customer service and innovation, which is driving improved market share performance1. This has also given us the financial flexibility to make balanced choices, investing to help customers and colleagues, while also delivering results at the top end of expectations.
Financial highlights
· Retail sales up 5.2%, ex. fuel sales up 2.0%. Statutory Group sales (ex. VAT) up 5.3%. Q4 ex. fuel retail sales up 7.1% (7.8% like-for-like)
· Grocery sales up 3.0%, driven by inflation and improved market share performance. Q4 grocery sales up 7.4%
· General Merchandise (GM) sales down 0.4%, with Argos gaining share in a weak general merchandise market. Q4 GM sales up 7.6% (Argos sales up 9.3%)
· Underlying profit before tax of £690 million, down 5% and at the top end of £630 million to £690 million guidance range. Up 18% versus 2019/20 pre-pandemic UPBT of £586 million. Year-on-year decline reflects annualisation of COVID-19 driven grocery volume, investment in the customer proposition and operating cost inflation, partially offset by operating cost savings and lower finance charges
· Statutory profit before tax of £327 million versus £854 million last year. Impacted by non-cash asset impairments, driven by a higher discount rate, and one-off income from legal settlements in the prior year
· Retail free cash flow £645 million
· Year end net funds, excluding leases, of £144 million, a £285 million improvement. Net debt including leases improved by £415 million to £6,344 million
· Underlying earnings per share 23.0 pence, down 9%. Basic earnings per share 9.0 pence, down 70%
· Proposed final dividend of 9.2 pence, full-year dividend of 13.1 pence, in line with last year
· Outlook: At this early stage of the year, we expect UPBT between £640 million and £700 million in FY2023/24 and we continue to expect to generate at least £500 million of Retail free cash flow
Simon Roberts, Chief Executive of J Sainsbury plc, said: “We really get how tough life is for so many households right now which is why we are absolutely determined to battle inflation for our customers. Our focus on value has never been greater and we have spent over £560 million keeping our prices low over the last two years. As a result, we are now the best value compared to our competitors that we have been in many years and we are delivering improved market share performance in Sainsbury’s and Argos.
“We are two years into our plan to put food back at the heart of Sainsbury’s and have focused our efforts on reducing costs right across the business, which has enabled us to make the right decisions for our colleagues and customers. At the same time, we have improved the performance and profitability of Argos, Tu, Nectar and Financial Services so that we can invest further in the areas that customers and colleagues care about most.
“Our colleagues do a fantastic job serving our customers every day and we know that they are also dealing with the impact of the rising cost of living. That’s why, over the last 12 months, we took the decision to invest £225 million in supporting colleagues including raising colleague pay three times, becoming the first major supermarket to pay our people the Living Wage across the whole country and providing free food at work and increased colleague discount. The results we have achieved this year are testament to the outstanding contribution across our entire team. I want to thank every one of my colleagues for their dedication and hard work.
“We continue to work closely with our suppliers and farmers and I am grateful for their support in what has been another difficult year for food supply chains. We know just how vital the agriculture industry is not only to Sainsbury’s, but to the country as a whole and this is why we have made the choice to give £66 million of additional support to British farmers over the last year.
“We made these very deliberate decisions and investments because they make our business stronger , but more importantly because they are simply the right thing to do. While there is still much to be done and there is no doubt that the year ahead will remain challenging, I’m confident we will continue to deliver for our customers, colleagues, communities and shareholders.”
Strategic highlights
· Food First: Customers want low prices, exciting new products and great customer service. This is where we are focusing our time, energy and investment and is why more customers are choosing to shop with us2. We have:
o Invested over £560 million in keeping prices lower over the last two years, £10 million more than the commitment we announced in December, helping us significantly improve our price position against all our competitors by as much as 16 per cent3
o Launched Nectar Prices, offering discounts to every Nectar customer in supermarkets and online, building on Your Nectar Prices which offers personalised discounts. The most active Your Nectar Prices users are saving almost £200 a year on their shopping4
o Exceeded our innovation target and launched more Taste the Difference products, helping to win market share around big events5 as customers increasingly celebrate at home
o Invested record amounts to increase colleague pay, provide free food and improve discount, driving up colleague and customer satisfaction scores
· Brands that Deliver: We have significantly improved profitability across our brands, creating £145 million6 more firepower to invest in our core food business. We have:
o Grown our Nectar digital users to 11 million and now have over 18 million Nectar members. Nectar360 is on track with its plan to deliver at least £90 million incremental profit by March 2026
o Transformed the Argos sales and cost base, making the business considerably more profitable and more competitive than pre-pandemic. Argos has gained market share7 in a weak general merchandise market
o Launched more Habitat partnerships with third-party designers and delivered value market share gains in a number of homeware categories8
o Grown full-price sales to now make up 80 per cent of our Clothing sales, up 15 percentage points versus pre-pandemic whilst also extending our range of third party clothing brands to offer more choice and convenience
o Increased Financial Services profits, reflecting higher credit demand and travel money volumes
· Save to Invest: We are making tough but necessary decisions to simplify, prioritise and partner right across the business. These create cost savings that fuel investments in price, innovation and customer service. We have:
o Delivered more than £900 million of cost savings over the last two years, remaining on track to deliver £1.3 billion of cost savings over three years, doubling the run rate from the three years to FY2019/20
o Reduced our operating cost to sales ratio further, now 97 basis points lower than FY2019/20 despite significantly higher than anticipated operating cost inflation. Productivity improvements have driven a reduction in our labour cost to sales ratio despite significant investment in colleague wages
Plan for Better: We are committed to playing a leading role in offering affordable high quality food that supports healthy and sustainable diets and helps customers reduce their impact on the planet. We have:
o Reduced absolute greenhouse gas (GHG) emissions within our operations to 461,692 tCO2e, a reduction of 38.2 per cent year-on-year. We were awarded an A rating for our Climate Change CDP submission for the ninth consecutive year and are the only UK food retailer to have achieved this
o Donated over 10 million meals through our partnership with Neighbourly since launching in 2021, preventing over 4,500 tonnes of food from going to waste
o Reduced absolute plastic packaging by 17.5 per cent from our baseline9. We are focused on reducing plastic packaging on high volume products and were the first retailer to vacuum-pack all beef mince, which will save over 450 tonnes of plastic a year