REG - Sainsbury(J) PLC - Q3 Trading Statement

J SainsburyAnnouncement

12/01/2022 07:00

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RNS Number : 1343Y  Sainsbury(J) PLC  12 January 2022

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Third Quarter Trading Statement for the 16 weeks to 8 January 2022

Strong Christmas grocery volumes and market share growth; upgrade to profit
guidance

Food First: focus on value, innovation and service delivering volume market
share gains

·    Market share gains: Our bold investments in value, new products and
service have driven volume market share gains, growing ahead of the market
through Q3 and the key Christmas period over one and two years(1)

·    Value: We have invested in the value of our food ranges ahead of the
market(2) through the year, Q3 and at Christmas to improve our price position
and are more competitive than ever. Following the success of our Sainsbury's
Quality, Aldi Price Match Christmas dinner campaign, we are now matching Aldi
prices on 150 of our highest volume fresh food products and putting over 2,000
lines into our Price Lock promise so customers can be certain they are getting
great value on the items they buy most often

·    Innovation: We launched over 600 new products in Q3, of which 300
were new Christmas products, as part of our plan to triple our levels of
product innovation. New Taste the Difference products in party food, desserts,
wines and spirits were really popular and we had record sales of champagne and
sparkling wines. Taste the Difference was our fastest growing product tier
with sales up 13 per cent over two years in the key Christmas weeks(3)

·    Service: We launched a record recruitment drive this Christmas,
investing to employ 22,000 temporary colleagues to make sure our stores were
safe and well stocked and to meet online demand. Online sales were nearly
double the level of two years ago(3). Working with our suppliers and investing
in our operations, we improved availability and our customer satisfaction
scores. To reward colleagues, we are investing £100m to increase the base pay
to £10 per hour from March

Brands that Deliver: strategy supporting General Merchandise and Clothing
profitability

·    General Merchandise and Clothing sales were down year on year
reflecting an exceptional performance last year, limited availability in key
product areas and our focus on profitable sales, including reduced promotional
activity

·    Full price Clothing sales were up 38 per cent versus two years ago as
we reduced markdowns and promotions

·    General Merchandise and Clothing profits are in line with
expectations, reflecting stronger gross margins and operating cost
transformation

Upgrade to profit guidance, reflecting strong grocery sales, cost savings
delivery and improved Bank outlook

·    We now expect to report underlying profit before tax of at least
£720m in the financial year to March 2022(4)

 

 Q3 and Christmas Trading Highlights(5 )   YoY Sales growth                                                    Yo2Y Sales growth
                                           Q3                   Christmas           Christmas exc. Boxing day  Q3                   Christmas           Christmas exc. Boxing day

                                           16 wks to 8 Jan 22   6 wks to 8 Jan 22   6 wks to 8 Jan 22(6)       16 wks to 8 Jan 22   6 wks to 8 Jan 22   6 wks to 8 Jan 22(6)
 Grocery                                   (1.1)%               0.1%                0.8%                       6.6%                 6.8%                7.7%
 General Merchandise                       (16.0)%              (10.6%)             (10.4%)                    (11.0)%              (8.6)%              (8.3)%
 Clothing                                  (2.7)%               2.0%                2.9%                       (1.7)%               11.6%               12.9%
 Total Retail (exc. fuel)                  (5.3)%               (2.9)%              (2.4)%                     1.4%                 2.4%                3.1%
        Groceries Online                   (16.5)%              (15.1)%             (15.1)%                    92.0%                95.2%               95.2%

 

 

 

Simon Roberts, Chief Executive of J Sainsbury plc, said

"I am really pleased with how we delivered for customers this Christmas. More
people ate at home and our significant investment in value, innovation and
service led to market share growth. At the same time, we are pleased to
increase profit guidance for the full year.

"The backdrop was challenging and our teams worked hard throughout the year
to make sure we had all of the products everyone wanted. Our suppliers did a
great job in challenging conditions throughout the quarter and I thank them
for all their support for our business.

"We were bold in our plan for product, value, innovation and service and
delivered volume growth ahead of the market. We delivered our best value food
this Christmas, launched our lowest ever priced Christmas dinner heading into
the key Christmas shopping week and we had our biggest ever New Year.
Customers also treated themselves and new Taste the Difference products in
party food, desserts, wines and spirits were really popular and we
had record sales of champagne and sparkling wines. Offering great value will
be more important than ever this year and we have just launched our bold new
Sainsbury's Quality Aldi Price Match campaign, which targets 150 fresh
products that customers buy most often.

"We also delivered a strong digital performance, responding to a surge in
demand for online deliveries over Christmas and last-minute online gift
shopping at Argos.

"Our teams have done a brilliant job working very hard in exceptional
circumstances. We delivered great service in our supermarkets and strong
availability this Christmas when it mattered most. I'm hugely grateful to all
our team for everything they did to deliver for our customers and we closed
all our stores on Boxing Day this year to give our colleagues a well-deserved
break. We are increasing base pay for Sainsbury's and Argos store colleagues
to £10 an hour from March to recognise their brilliant efforts every day in
serving our customers."

Outlook

Our expectations for full year profits are ahead of previous guidance, with
investment in the customer proposition and higher operating cost inflation
offset by structural cost savings and stronger than expected grocery volumes,
driven in part by increased in-home grocery consumption. Argos continued to
benefit from stronger margins supported by transformational operating cost
reductions. Financial Services profit expectations are running ahead of
consensus(7) with bad debts lower than expected and lending volumes starting
to recover. We now expect to report underlying profit before tax of at least
£720m in the financial year to March 2022.  Free cash flow remains strong
and we expect to meet our net debt reduction target ahead of schedule.

 Total sales performance(5)         2020/21                             2021/22                   2021/22

                                                                        YoY                       Yo2Y
                                    Q1       Q2       Q3       Q4       Q1      Q2       Q3(8)    Q1       Q2       Q3(8)
 Grocery                            10.5%    5.1%     7.4%     7.1%     0.8%    0.8%     (1.1)%   11.3%    6.0%     6.6%
 General Merchandise                7.2%     7.6%     6.0%     17.6%    (1.4)%  (11.4)%  (16.0)%  5.6%     (4.7)%   (11.0)%
 GM (Argos)                         10.7%    10.9%    8.4%     18.1%    (3.7)%  (12.0)%  (16.1)%  6.7%     (2.4)%   (9.1)%
 GM (Sainsbury's   Supermarkets)    (9.3)%   (6.9)%   (5.4)%   14.8%    11.2%   (8.0)%   (15.7)%  0.9%     (14.4)%  (20.0)%
 Clothing                           (26.7)%  (7.5)%   0.4%     4.2%     57.6%   9.2%     (2.7)%   15.5%    1.0%     (1.7)%
 Total Retail (exc. fuel)           8.5%     5.2%     6.8%     9.2%     1.6%    (1.7)%   (5.3)%   10.3%    3.4%     1.4%
 Fuel                               (56.1)%  (29.3)%  (29.0)%  (38.5)%  95.1%   36.1%    47.5%    (14.4)%  (3.8)%   3.6%
 Total Retail (inc. fuel)           (2.1)%   (0.4)%   1.7%     1.6%     8.5%    2.7%     (0.1)%   6.2%     2.2%     1.7%

 

 Like-for-like sales performance(5)    2020/21                      2021/22
                                       Q1      Q2      Q3    Q4     Q1    Q2       Q3(8)
 Like-for-like sales (exc. fuel)       8.2%    5.1%    8.6%  11.3%  1.6%  (1.4)%  (4.5)%
 Like-for-like sales (inc. fuel)       (2.3)%  (0.5)%  3.2%  3.2%   8.4%  3.0%    0.6%

 

 

Strategic and operational highlights

 

Food First

We continue to make good progress against the plan we set out in November 2020
to put food back at the heart of Sainsbury's. We are committed to delivering
brilliant value for our customers on the products that they buy most often,
and our new and exciting products are proving to be popular. Q3 grocery sales
were slightly below last year's elevated levels, up 6.6 per cent versus Q3
19/20 and ahead of last year over the key Christmas weeks. Fuel sales
increased by 47.5 per cent as customer demand normalised and we gained market
share.

 

Value

·    Our Value Index improved against all key competitors and improved
670bps against Aldi year on year(9). Customer satisfaction for Value for Money
Spent is up 4 percentage points year on year(10)

·    In December we launched our biggest ever festive value campaign to
match Sainsbury's Quality with Aldi prices on key Christmas dinner items.
Turkey Crowns were £6.89 a kilo, a 1.4kg gammon joint was priced at £5.70
and festive vegetables were only 19p a pack. This bold campaign encouraged
more customers to do their festive shopping at Sainsbury's and those products
sold over 20 per cent more volume than last year(11)

·    To kickstart the New Year we have launched a new wave of Sainsbury's
Quality, Aldi Price Match with a focus on 150 fresh products that customers
buy most often

 

Service

·    Colleagues delivered excellent customer service throughout the key
Christmas weeks and customers felt safe shopping with us(12). Friendliness and
knowledge of staff scores both improved year on year

·    In recognition of the outstanding job our colleagues do for our
customers, we are investing £100 million in colleague reward, increasing the
base rate for our shop colleagues to £10 per hour from March and increasing
the frequency of a higher discount for colleagues when they shop with us

·    We delivered strong food availability for Christmas, despite many
challenges, benefiting from our scale, strong supplier relationships and the
adaptability of our supply chain and logistics operations

·    Groceries Online sales grew by 92 per cent versus two years ago, with
weekly orders increasing again in recent weeks to over 700,000 per week.
Orders in Christmas week were up 41 per cent year on year

·    Our On Demand grocery offer continues to grow, operating from around
580 stores through Chop Chop, Deliveroo and Uber Eats

·    We opened three new supermarkets during the quarter in Colwick,
Ludlow and Aylesbury and opened five convenience stores, with sales ahead of
expectations

·    As part of our Plan for Better, all new supermarkets have been
designed with all natural refrigerants and use 100 per cent renewable
electricity

·    In partnership with Neighbourly, our stores connected with local
partners to redistribute nearly 150,000 meals on Christmas Eve to those in
need

 

Innovation

·    We launched over 300 new Christmas products, including 100 premium
Taste the Difference products. This is a significant increase year on year, in
line with our target to triple our levels of food product innovation. Standout
new products included our Taste the Difference Belgian Chocolate & Salted
Caramel Star, Bucks Fizz Smoked Salmon and Lemongrass Skewer Prawn Pops

·    Taste the Difference sales were up 13 per cent over two years in the
key Christmas weeks, as many customers chose to treat themselves and trade up.
Taste the Difference Meat, Fish and Poultry sales were up 25 per cent, Produce
sales up 16 per cent and Bakery sales up 12 per cent(13). Sales of champagne
and sparkling wines were the highest ever and we sold our biggest ever volume
of Taste the Difference mince pies

·    We delivered our best ever Christmas for meat-free alternative
centrepieces, with popular products including Plant Pioneers Maple Glazed No
Gammon Joint and No Salmon Encroute

·    We reduced plastic by nine tonnes in our Christmas chocolate range,
brandy butter, roulade and gift sets packaging and launched a plastic-free
range of Christmas crackers

·    Performance of our first Autumn Editions food range was really strong
with many lines exceeding expectations

 

Brands that Deliver

 

·    General merchandise sales declines reflect the impacts of both weak
demand and limited supply in some key categories and our strategy to focus on
profitable sales. The technology, gaming and toy markets all declined by
double digits(14). This reflects tough comparatives against last year's
lockdown and also the ongoing impact of global supply chain challenges on
product availability

·    Sales in some categories continue to be additionally impacted by
deliberate choices we made to run fewer promotions and focus on more
profitable sales, significantly reducing the number of promotional days versus
two years ago(15). These choices and the relative strength of our home and
furniture categories, which benefitted from increased Habitat participation,
have supported Argos's gross margins. We outperformed the Furniture market on
a two-year basis(14)

·    We closed 27 Argos standalone stores in the quarter, bringing the
total to 338 and opened 25 Argos stores in Sainsbury's supermarkets, bringing
the total to 398. Argos digital participation remains high with 77 per cent of
sales originating online

·    Full price Clothing sales were up 38 per cent versus two years ago as
we reduced markdowns and promotions and focus on good value all year round.
Particular highlights this year were Christmas jumpers and matching family
pyjamas

·    Building on the launch of My Nectar Prices in September we continue
to drive Nectar digital registrations and now have 8.7 million digital
customers. We are currently delivering around 95 million My Nectar Prices
personalised discounts every week

·    In Financial Services we are making good progress reducing costs. We
are seeing encouraging first signs of improvement in volumes, with consumer
spend and credit demand both increasing and bad debts lower than expected

 

 

Tim Fallowfield, Company Secretary and Corporate Services Director, was
responsible for the disclosure of this announcement.

 

Investor Relations
Enquiries
    Media Enquiries

James Collins   +44 (0) 20 7695 0080
                Rebecca Reilly   +44 (0) 20 7695
7295

 

Notes

Certain statements made in this announcement are forward-looking statements.
Such statements are based on current expectations and are subject to a number
of risks and uncertainties that could cause actual events or results to differ
materially from any expected future events or results referred to in these
forward-looking statements. Unless otherwise required by applicable law,
regulation or accounting standard, we do not undertake any obligation to
update or revise any forward-looking statements, whether as a result of new
information, future developments or otherwise.

 

A conference call will take place at 09:15. To listen to the audio webcast we
recommend that you register in advance. To do so, please visit
https://www.about.sainsburys.co.uk/investors/results-reports-and-presentations
(https://www.about.sainsburys.co.uk/investors/results-reports-and-presentations)
prior to the event and follow the on-screen instructions. A transcript will be
available following the conference call.

 

Sainsbury's will announce its Preliminary Results for the financial year to 5
March 2022 on 28 April 2022.

 

1 Kantar Worldpanel division, Q3= 12 weeks to 26 December 21, 27 December 20
and 29 December 19. Christmas = 4 weeks to 26 December 21, 27 December 20 and
29 December 19. Total Grocery volume growth

2 Nielsen panel data, Top 100 products by retailer, Average Selling Price
inflation YoY

3 6 weeks to 8 Jan 22

4 6 July 2021: "We now expect to report underlying profit before tax of at
least £660 million in the financial year to March 2022"

5 Including VAT

6 Adjusted for Boxing Day 2021 closure by excluding Boxing Day sales from
prior years. 6 weeks to 8 Jan 22

7 Based on latest internal forecasts. Current analyst consensus for Financial
Services Underlying Operating Profit: FY21/22 £26m

8 In calculating the sales performance, Q3 2020/21 and Q3 2019/20 comparatives
have been adjusted to reflect a 16 week trading period (previously 15 weeks)

9 Value Reality. Sep-Jan 22 vs Sep - Jan 21; Edge by Ascential; internal
modelling

10 Service Management Group Competitor Benchmark Survey, Q3 2021/22

11 On SKUs included in the festive SQAPM campaign, sales data for financial
week 42 YoY

12 Kokoro safety measures, The Score. Top performing major grocer financial
weeks 40-44

13 Taste the Difference sales growth on a two-year basis, 6 weeks to 8 Jan 22

14 Tracked Markets Product Volume Market Share Performance, 3 months ending
November 2021, Yo2Y. GfK data for Gaming and Technology. NPD data for Toys

15 Q1-3 21/22 vs Q1-3 19/20

 

 

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