J Sainsbury plc

all of our suppliers and all of our farmers, because our strong quarter three performance was the result of an outstanding team effort across our whole business. Probably the best Christmas execution I've seen us deliver in my nine years at Sainsbury's. So a big thank you to our entire team. We've described very clearly in our statement today how we set ourselves up strongly to deliver over the peak period. We upgraded our profit guidance in November, but we were super clear then, as we have been all year, that our priority was sustaining the strength of our competitive position and really standing out in an increasingly competitive market. So we invested in the areas that really matter most to customers, delivering great value, distinctive and differentiated quality and innovation, outstanding product availability, and market-leading customer service. And our customer satisfaction metrics across all of these areas tell us that customers really noticed, driving consistently strong trading momentum across the whole quarter against a softening grocery market. Performance was strong across all our grocery formats. Alongside our core supermarkets, we had record sales in our convenience stores and online sales growth of 14%, including a very strong increase in on-demand sales. But perhaps more than anything, we're particularly proud of the flawless execution of our plan this Christmas, particularly across fresh food. We delivered our best ever fresh food availability when it mattered most to customers in the key Christmas week and on the really big days right across the store network. And we did this together with a clean stock outturn post-peak with very limited waste and next to no markdown. This reflects the investments that we've made across our operations in recent years, as well as all of our colleagues and our suppliers planning and delivering this. And again, a big thank you to them all. Now, the strength of our trading performance has meant that we're able to reiterate our profit guidance today, despite a weaker general merchandise backdrop. And we're upgrading our free cash flow guidance, reflecting the strong working capital progress in particular. We continue to expect to return more than £800 million of cash to shareholders this financial year. Now, these two charts firstly show the strength of our grocery volume market share performance across this peak quarter, where we've now outperformed the market for six consecutive years. And secondly, the strengthening of our performance relative to the wider grocery market over the course of the year, with switching gains accelerating over the course of the year and now more than double the level in quarter three that they were in quarter one, with gains coming from across the breadth of our competitive base. Now, looking at sales growth across the business, grocery growth was broadly in line with the first half, with volume growth remaining at around 2% despite a softer market backdrop. Clothing sales were broadly in line with last year, gaining share in a weak, seasonally driven market. And general merchandise sales were down year on year, partly reflecting the reduced space allocation. Argos sales declined by 1%, but with volume growth offset by the impact of lower average selling prices across the market, reflecting subdued customer spending on bigger ticket items like furniture, heavy promotional activity, and a weak gaming market. Now, focusing back on the drivers of our strong grocery performance, the consistency of our value delivery is key here. Nectar prices are the price match, and for the first time this peak period, through personalised your Nectar prices being available to all our supermarket customers. More customers are shopping bigger baskets at Sainsbury's, and this really stands out in a market where volume growth has been under pressure. Sainsbury's has always had a reputation for quality fresh food, and our performance here has been outstanding, with fresh food sales growth of 8%. Strong availability has supported customers buying more fresh ingredients and proteins, with fruit and veg sales up 6%, meat, fish and poultry sales up 9%, and dairy sales up 10%. Perhaps the clearest indicator of customers choosing Sainsbury's for their big Christmas shop is our fantastic availability and the fact that we sold 20% more turkeys year on year and every single one of them was British. Taste the difference sets us apart from our competitors with our high premium label sales penetration reflecting our reputation for quality and innovation. From this strong base, we grew premium own label sales and market share faster than anyone in the market. Taste the difference, fresh food sales were up 15% year on year. Argos delivered volume growth in a subdued general merchandise market with weak consumer confidence, a high level of promotional activity and headwinds from online traffic trends. Volume growth was offset by a lower average selling price, reflecting promotional activity and the impact of weaker big ticket sales in categories such as furniture and lower gaming sales. Sales growth and market share was strong in homewares, electricals and toys, in our expanding ranges of supplier direct fulfilled items and through our app, but we are building higher customer loyalty and share of mind. Brand perceptions have improved on value, quality and overall satisfaction. And tight stock control ensured that we exited the quarter with a very clean stock position. We continue to expect Argos profits to be broadly in line with last year, but down year on year in the second half. Now, we've made reference to the balanced choices we're making across the business many times. We're investing in our customer proposition across value, quality, and service and bringing more great food to more customers in more locations and in delivering personalized value. And through our capital investment programs across technology, digitization, and automation, we're improving the customer proposition, we're improving the store execution and efficiency, and we're building a structural cost advantage over competitors who are not making these investments. These balanced choices help us deliver a consistently winning proposition for customers and sustain momentum that will deliver for all our stakeholders. We look forward to talking in more detail to you about these with our four-year results in April. So now let's open the call for Blandon and I to take all your questions. Thank you.

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Good morning. Happy New Year to you guys, too. First of all, would you mind, I think there's a bit of confusion out there today, why we're seeing consensus move down on what is quite a strong like-for-like numbers. Could you help us understand a bit more about the moving parts of the P&L and about maybe grocery over-deliver, maybe there's a bit more pressure in general merchandise and Argos than you were expecting? And then the second question, if I may, is could you just give us your thoughts on the outlook for inflation and volume in grocery over the year ahead? And finally, I just want to check your comments. I guess it's a bit on from that second question. Your competitor yesterday called the consumer resilient. And I just wondered whether you would echo those remarks or how you would see the consumer. Thank you.