J Sainsbury plc

Hello and welcome to the Sainsbury's 2025-26 Q1 Trading Statement Analyst Q&A call. On the call this morning is Simon Roberts, Chief Executive and Blonard Bergin, Chief Financial Officer. I will now hand over to Simon Roberts for the presentation.

Thank you. A very good morning, everybody, and welcome to our first quarter trading statement covering the 16 weeks to the 21st of June. I'm going to talk briefly about our trading performance, and then, of course, Brandon and I will be very happy to take all the questions. So I want to start here with a slide that you may remember. We shared our prelims results back at the end of April. Now, these are the priorities that we set out with the clear intention to focus and energize all of our team across the business to accelerate into the year ahead, and deliver the next phase of our growth. So now 16 weeks into the new financial year, the results we've issued this morning demonstrate the strong trading momentum we are driving across all of our brands. We're doing exactly what we committed to do, sustaining the strength of our competitive position in grocery and growing market share. In fact, we built further on our strong competitive position during the quarter, improving our prices against all competitors and consistently delivering our winning combination of value, quality, availability, and service. As a result, our food business continues to go from strength to strength. We're growing volumes faster than the market for our third consecutive year, and we've achieved our highest market share since 2016. And we're making good progress with our plan to bring the best of our food offer to more customers, with seven new convenience stores and two new supermarkets opening during the quarter. Now, if you've been into our stores or shops online recently, you'll have seen that we're going further and faster with our plan to deliver leading product innovation, particularly through Taste the Difference. And our customers are really buying into this. At the same time, we're scaling our personalized loyalty program to fully optimize how we deliver even more great value through net prices. And all of this is underpinned by the investments we're making in technology to drive efficiency, enhance our platform for growth, and support the delivery of our £1 billion cost-saving target. This is a vital point of difference for us as we continue to strengthen the competitive advantage we've built. Now, today, we've reiterated our four-year guidance of around £1 billion of retail operating profit and at least £500 million of retail-free cash flow. As we discussed at the prelims in April, this guidance allows us to continue to make balanced choices and provides the capacity to navigate the environment around us as we travel through the year ahead and deliver on our next-level Sainsbury's commitments. So, turning now to our sales performance for the quarter. We continue to drive strong momentum in grocery, growing sales by 5% against a particularly tough comparison. On a two-year basis, grocery sales were up 10%. We delivered good volume growth, with a slightly higher rate of inflation coming through across the industry, as we sold for increased cost pressure on our cost basis and those of our suppliers. Harvard grew sales by 4.4% ahead of a subdued general merchandise market, helped by warm and dry spring weather and against a weak comparative. Now, you can see here the strength of our grocery business, outperforming the market again this quarter and ahead of our key competitors. And if you look at the chart on the right-hand side of this slide, you can see clearly that we're delivering this the same volume growth against a tough comparative with very strong two-year outperformance. We're consistently delivering on our winning combination of value, quality, availability, and service. And this drives our confidence in maintaining this momentum, and we expect to continue to grow grocery volumes ahead of the market this year. Now, we all know there's been a lot of noise in the market in recent months, and there are a number of moving parts in the mix. Across the market, everyone has raised their game when it comes to delivering value for customers, and marketing activity has been ramping up to amplify key value messaging. But at the same time, operating cost inflation is working its way through the system. And so it's a very dynamic market at the moment. Within all the noise, we're very pleased with where we are and the momentum we have. Our value proposition is stronger than ever, and we've improved our price position against all competitors this quarter, as you can see. We're now offering customers even more opportunity to save on the items they buy most often through the biggest hourly price match commitment in the market on around 800 products and through next to prices on over 9,000 products. And it's clear that customers are really noticing. Our value-for-money customer satisfaction measures are now at the highest level they've ever been. Place the Difference has been at the centre of our strategy to put Goosebees back at the heart of Sainsbury's and our reinvigorated passion for innovation. It's a real point of difference for us, with a significantly higher proportion of our sales coming through premium private label than competitors. And we're continuing to make bigger market share gains than any other retailer in this space. We're delivering another strong performance in taste and difference this summer, from really high-quality essentials like our taste and difference strawberries, perfect to enjoy as we come into the Wimbledon season, and exciting new innovations in our deli and picnic ranges, which have already been very popular with customers. We grew sales by 18% this quarter, which was on the back of two years of very strong growth. And in fresh fruit, we've grown taste for difference by almost 50% over the last three years. Now, however customers want to shop with us, whether it's in our supermarkets, convenience stores, or online, our colleagues are closely focused and are doing a brilliant job in delivering the very best experience we can. Across all our channels this quarter, we've seen strong improvements in customer satisfaction, with standout scores for the availability of products, appealing promotion, and value for money. And we're really proud of the service and experience we now consistently deliver. Our customer satisfaction metrics are testament to the commitment and dedication of all of our colleagues and team. And at the same time, our suppliers and farmers have also been doing the best job in ensuring we maintain the highest levels of supply service and availability. So you've heard me say before that to win in this industry, we have to show up across all these key components of value, quality, availability, and service, day in, day out, consistently delivering on the things that matter most to customers. And you can see on this slide that when we do that, We become the first choice of food for many more customers who then choose Sainsbury's for their big trolley shops, as you can see on the right-hand side of the slide. This is the measure that is really key here. We have nearly a million more loyal primary customers than we had four years ago, a huge step on versus our key competitors over the same period of time. Now, our Nexta loyalty program has been truly transformational for our grocery business, and Nexta Privacy has been a key driver of the increase in customer perception of our value and of our primary customer growth. The sense of our loyalty platform powers Nexta360, our market-leading loyalty customer insight and retail media business. Now, we recently announced that we're taking another big step forward with this, with the launch of Nexta360 Columns. the most advanced retail media platform of its kind in the UK. Column will be a game changer in terms of how easily brands and agencies can access the full potential of our retail media network to run on-channel campaigns and importantly be able to measure their effectiveness. Built in-house, Column seamlessly brings together all of our existing capabilities in one place. a single platform for audience insights, media planning, and activation and measurement. It will set us apart in the client service that we can provide, delivering an enhanced experience that is quick and simple to use, and with market-leading measurement of performance available throughout. Now, we're really proud of what we're doing here with Colin, and we're excited about its launch later this year. It will be a huge unlocker of our potential to go much further in this space, and we're extremely encouraged by the phenomenal response we've had from brands, agencies, and partners so far. Now, building on early progress in Q4, we're pleased to have driven further improvements at Argos this quarter, delivering sales growth, traffic growth, and volume growth as we showed up well for customers, particularly when the weather was warmer and drier in comparison to a poor start for the summer last year. And we're making good progress too with our more Argos, more Optum strategy. We're well underway with the strategic choices we laid out in April, which are all about improving the digital journey, strengthening our value proposition, increasing our desirability and awareness of the ranges that we have at Argos, and further expanding our Stop Loss ranges. However, of course, it is a challenging backdrop. The general merchandise market is highly competitive and remains subdued as customers continue to spend carefully on discretionary items. There's also been a big increase in activity from some of the global online retailers, refocusing their efforts and investment on the UK, so it's a very competitive market. And we're now facing into top of house comparisons in the second quarter, as we're up against the period when we ran a lot of clearance activity last year. We know there's a lot more to do here, and the team now leading us are very firmly focused on strengthening our fundamentals and delivering a stronger sustained performance over time. And so in summary, we're really pleased with where we are at this point in the year as we deliver against the priorities that we set out for the year in April. We're also encouraged by the level of strategic and operational progress being achieved right across the business and with our strong and sustained momentum relative to the market. We are ready to continue building on this with a particularly strong plan this summer across value, quality, innovation and service at both Sainsbury's and Argos. And our team is more joined up than ever, focused and connected. We are ready to seize the opportunities ahead as we prepare for the second half. So thank you for listening, and we'll now hand over to Q&A.

We will now go to 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're dialed in, please press star nine on your handset now. To keep things fair as possible, we ask that you only ask one question. If we get additional time, please rejoin the queue by re-raising your hand or pressing star nine and we will try to get back to you. We will pause for a moment to allow questioners to enter the queue. The first question is from Manjari Dhar at RBC. Please unmute yourself and begin with your question. Morning. Morning. Thank you for taking my question. I just had a question on taste and difference, if I may. I think the growth has accelerated, obviously, a strong performance. I just wanted to give some colour on how much you think that acceleration is your own initiative and how much other factors in the market consume the trends of other players and how sustainable you think that high level of growth could be. Thank you.