J Sainsbury plc

Hello and welcome to the Sainsbury's 2024-25 Q3 Trading Statement Analyst Q&A call. On the call this morning is Simon Roberts, Chief Executive and Blonid Bergin, Chief Financial Officer. I will now hand you over to Simon Roberts for the presentation.

Well, thank you and good morning, everyone. Welcome to our quarter three trading statement covering the 16 weeks to the 4th of January. I'm going to talk briefly about our trading performance and then, of course, Blonid and I will be happy to take or your questions. So first and foremost, I want to say that we're really pleased with our grocery performance. As you know, we were up against some tough comparatives, particularly at Christmas, and we knew we would need to be at our best operationally and make the right balanced and targeted investment choices to deliver the growth that we planned, particularly in fresh food with customer shopping later than ever. Specifically, we invested in service, availability, and value. And our value index against our biggest competitors is as strong as ever. And customers recognize this with our best ever Christmas availability and our highest ever customer satisfaction scores, both in stores and online. So I'd really like to thank all of our colleagues for what was an outstanding effort across stores, depots, and our support centers. And of course, everyone out on the road in vans and lorries. And a big thanks to our suppliers for their fantastic support in delivering that best ever availability. We've continued to be super sharp on value and customers love the value they get through Nectar prices. We've rolled out across more of the range and it's a key driver of the continuing strong improvement in our value perception. And at the same time, we've continued to drive innovation. adding more than 300 new Taste the Difference products this Christmas, driving growth ahead of all our key competitors. Argus sales were strong over the key Black Friday and Christmas periods, reflecting improvements to the customer proposition. But, as you'll have seen from some of the macro data published this week, it was a tough backdrop for general merchandise spending outside of those key weeks, and this impacted both sales and margins. Against particularly tough volume and inflation comps from last year, we grew grocery sales by around 4% over the quarter and the key Christmas weeks with volume growth the main contributor. General merchandise sales within Sainsbury's largely reflected the decisions we've made on product categories and space allocation, offset by strong sales and market share gains in our clothing business, with sales up 2% over the quarter and double-digit sales growth in clothing at Christmas. At Argus, sales were down slightly year-on-year over the quarter, reflecting weak consumer spending and discretionary categories, but they were stronger over the Christmas period. Now, the strength of our grocery performance against that tough comp is clearer here, with our two-year grocery volume growth continuing to accelerate, up nearly 6% in the third quarter and ahead of the market and key competitors over the four key Christmas weeks. We've started to see some modest benefit from space reallocation to food, with an additional of around 1% by the end of the quarter. Now, this benefit will build substantially over the course of this year as the programme builds and as the former home-based stores come online. Regionally, this will also put us in a stronger position to pick up a bigger proportion of trade outside of our traditional southern strongholds. Now, the consistency of our delivery on value, innovation and service really shows through here, where we've won market share at Christmas every year for the last five years, with more and more customers choosing Sainsbury's for their big basket shop and nearly 20% of new big basket customers entirely new to Sainsbury's. This slide we've updated from our interim, showing again our winning combination across quality, service and value. In our supermarkets, we saw higher year-on-year customer satisfaction across all the key measures on value, quality and availability. In online grocery, we delivered record customer satisfaction driven by improvements in availability and order completeness. Probably the most important metrics for customers doing their big Christmas shop online. And Sainsbury's reputation for quality and the innovation we're delivering really shines through, I think, here. Taste the Difference already has the biggest premium own label participation of any grocer in the market, and we've built even further on that. With sales up 16% in the key Christmas weeks, nearly 20% in key fresh food categories, and Taste the Difference products in more than half of big Christmas shops. Now, these charts give a bit of context to the Argos sales numbers. Not the top line growth that we'd hoped to deliver in Q3, but clearly a much better trend over the last two quarters, reflecting improved online traffic. As you can see from both of the top two charts, we're now heading into softer comparatives over the next two quarters. Now the bottom chart shows that customers responded well to our big red promotional events, the key Black Friday weeks, and the immediate run into Christmas. But outside these periods, sales were subdued across the whole market, particularly in the period between Black Friday and, as you can see, Christmas. Now, this impacted sales, but also margins with a high level of promotional activity in the market. So we're now nine months into the next level Sainsbury's plan that we outlined last February. And looking at the key outcomes we detailed, we're really pleased with the continued momentum at Sainsbury's. with two year volume growth continuing to accelerate as more and more customers choose Sainsbury's for their big shop and we add more food space. Nectar is more relevant and more rewarding for customers and Nectar 360 is a significant contributor to profit growth. We're making progress at Argos with a stronger digital proposition and improved online traffic trends, driving good conversion with customers spending over the key trading periods. and we're making good progress across our savings programmes and capital investments that deliver efficiency gains, and we continue to make balanced choices. These are ever more important as we head into a year of particularly high operating cost inflation. We've guided today that we expect four-year underlying retail profits to be in line with consensus, up around 7% year on year, with very strong profit leverage at Sainsbury's, particularly strong in the second half. good cost saving progress and a growing profit contribution from Nectar offsetting profit pressure at Argos. Looking to the year ahead, our next level plan, our scale and the positive momentum we have across our grocery business in Nectar and in our cost saving program put us in a really strong position to navigate the tough cost environment. And we'll come back and talk to you more about that in April with our four year results. So now let's open up the call for Bernard and I to take all your questions. Thank you.

We'll now go to the Q&A. If you would like to ask a question, please use the raise hand feature at the bottom of your screen. Alternatively, if you have dialed in, please press star nine on your handset now. To keep things as fair as possible, please only ask one question per person. If we get additional time, please rejoin the queue by re-raising your hand or pressing star nine and we'll try to get back to you. We will pause for a moment to allow questioners to enter the queue. The first question is from Rob Joyce at Exane BNP Paribas. Please unmute yourself and begin with your question.