Delivery of strategy on track in a highly competitive market
Financial summary
- Underlying Group sales(1) (inc VAT) down 2.0 per cent to £13,641 million (2014/15: £13,916 million)
- Retail sales (inc VAT, ex fuel) down 0.1 per cent
- Like-for-like sales (inc VAT, ex fuel) down 1.6 per cent
- Underlying profit before tax(2) down 17.9 per cent to £308 million (2014/15: £375 million)
- Underlying basic earnings per share(3) down 17.2 per cent to 12.0 pence (2014/15: 14.5 pence)
- Return on capital employed(4) of 9.1 per cent (2014/15: 11.1 per cent)
- Return on capital employed excluding pension fund deficit of 8.5 per cent (2014/15: 10.3 per cent)
- Interim dividend 4.0 pence per share, representing 30 per cent of last year’s full year dividend (2014/15: 5.0 pence per share)
Statutory
- Group sales (ex VAT, inc fuel) down 2.0 per cent to £12,419 million (2014/15: £12,667 million)
- Items excluded from underlying deliver a profit of £31 million (2014/15: £665 million loss)
- Profit before tax of £339 million (2014/15: £290 million loss)
- Basic earnings per share 13.6 pence (2014/15: 18.0 pence loss per share
Strategic performance
Great products and services at fair prices
- Customers continue to see us as a leader in quality and we are on track to improve the quality of 3,000 own-brand products
- £150 million investment in price has helped to drive transaction growth of almost three per cent and volume growth of one per cent. We will continue to remain competitive on price
- Customers like our lower regular prices and price satisfaction scores increased again this half
- Reduced promotional activity helped us improve our forecasting, driving better availability and reducing waste. This resulted in even better product freshness, supporting our quality commitment
- Although food sales have declined by nearly one per cent, our Taste the Difference range delivered over two per cent volume growth and continues to gain industry recognition, voted the best supermarket range by the Good Housekeeping Institute for the third year running
- Clothing performed strongly, with sales up nearly ten per cent and we successfully launched Tu online. Initial sales have exceeded management expectations
- Sainsbury’s Bank continues to deliver good operational performance, with total income up over six per cent. Transition costs are now expected to be at the top end of the £340 million – £380 million range driven by a six to nine month delay in programme delivery
There for our customers
- Sales at supermarkets declined just over two per cent driven by food deflation, lower like-for-like volumes and customers shopping across multiple channels
- We are trialling new formats in six supermarkets and our micro convenience store layout in response to changing customer shopping missions
- Convenience stores delivered sales growth of nearly 11 per cent and we opened 37 new stores, taking the total to 741 stores at the half
- Groceries online delivered sales growth of seven per cent, with orders up nearly 14 per cent
- New one million sq ft general merchandise depot opened at the Daventry International Rail Freight terminal, creating 900 jobs and supporting the growth of our general merchandise business
Colleagues making the difference
- Announced a four per cent pay increase for 137,000 colleagues who work in our stores, including those under 25, in recognition of the great service they provide to our customers
- Our colleagues continue to deliver great service, winning the Grocer Gold Customer Service Award and the Grocer Gold Availability Award for the third year running
- Named Convenience Retailer of the Year for the sixth consecutive year at the Retail Industry Awards
Our values make us different
- Launched an ambitious £10 million, five-year project, Waste Less, Save More, to tackle food waste
- Continue to reformulate our products to improve quality and taste and to reduce sugar
- We have reformulated by Sainsbury’s yoghurts, saving 37 tonnes of sugar, equivalent to over 147 million calories from our customers’ baskets each year
- Nearly 35 tonnes of sugar removed from our own-brand juices and juice drinks
- Participated in 25 Pride events across the UK to support our ambition to be the most inclusive retailer where people love to work and shop
- Co-sponsored the BITC survey of race at work in the UK, surveying 24,000 people to better understand the experience of ethnic minorities at work
Financial performance
- The market remains particularly challenging. Overall market share declined marginally, by 17 basis points, to 16.5 per cent(5), driven in particular by the growth of the discounters
- Delivered operating cost savings of £115 million in the first half; full year cost savings are now expected to be around £225 million. We are on track to deliver £500 million cost savings over the next three years
- Improved liquidity and financial flexibility through the issuance of £500 million of perpetual securities
- Pension deficit reduced to £473 million, down £178 million since March 2015
- Announced a strategic partnership that will see LloydsPharmacy acquire Sainsbury's pharmacy business for a consideration of around £125 million(6)
- Mobile by Sainsbury’s will close on 15 January 2016. Mobile is important to our customers and we are looking at other network options
Mike Coupe, Chief Executive, said: “We are making good progress against the strategy we outlined last November. We are delivering volume and transaction growth as customers value our quality improvements and our clearer, simpler message of lower regular prices.
“To complement our core food offer of great quality and inspiring food, sold at fair prices, we are delivering on our strategy to expand our non-food businesses with further growth in clothing, general merchandise and Sainsbury’s Bank. Our strategy of investing to ensure customers can shop with us across multiple channels remains a strategic advantage. Shopping at Sainsbury’s is now more convenient than ever for our customers and we are able to reward them for their loyalty.
“We continue to run the business efficiently and our cost savings programme is ahead of plan. We now expect savings of around £225 million by the end of this financial year and we are on track to deliver our target of £500 million cost savings over the next three years.
“The grocery retail marketplace remains challenging but Sainsbury’s is a great business, run by an experienced management team, supported by talented colleagues and strong values. I am confident we are making progress and we are looking forward to a successful Christmas, offering our customers fantastic products and great value. We think our Orkney Island dressed crab, our Taste the Difference 18 Month Mature Cognac Laced Christmas Pudding, which recently won the Good Housekeeping 2015 taste test, and our stunning hand-finished Taste the Difference Golden Bow Fruit Cake will be customer favourites.”

Notes to editors:
1. Underlying Group sales excludes a £5 million adjustment (2014/15: £11 million) for fair value unwind relating to the acquisition of Sainsbury’s Bank.
2. Underlying profit before tax: Profit before tax before any profit or loss on the disposal of properties, investment property fair value movements, retail financing fair value movements, IAS 19 pension financing element and defined benefit pension scheme expenses, acquisition adjustments and one-off items that are material and infrequent in nature, but after the coupons on the perpetual subordinated capital securities and perpetual subordinated convertible bonds.
3. Underlying basic earnings per share: Underlying profit attributable to ordinary shareholders, net of attributable taxation, divided by the weighted average number of ordinary shares in issue during the period, excluding those held by the Employee Share Ownership Plan (‘ESOP’) trusts, which are treated as cancelled.
4. Return on capital employed: Underlying profit before interest and tax, divided by the average of opening and closing capital employed (net assets before net debt).
5. Total Grocers Kantar till roll on a 52 week basis to 13 September 2015.
6. Subject to a working capital adjustment
7. 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. They appear in a number of places throughout this announcement and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. 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.
8. Sainsbury’s will report its 2015/16 Third Quarter Trading Statement at 07:00 (GMT) on 13 January 2016.
A results presentation for analysts and investors will be held at 09:30 on 11 November 2015.
To view the slides of the results presentation and the webcast: We recommend that you register for this event in advance. To do so, visit www.j-sainsbury.co.uk and follow the on-screen instructions. To participate in the live event, please go to the website from 09:00 on the day of the announcement, where there will be further instructions. An archive of the webcast will be available later in the day.
To listen to the results presentation: To listen to the live results presentation by telephone, please dial 0800 6781161 (or +44 (0)1296 311600 if you are unable to use the primary number). The pass code for the event is 752 570. A transcript of the presentation and an archive recording of this event will be available later in the day at www.j-sainsbury.co.uk