Positive momentum across the business
Strategic Highlights
- More customers than ever chose to shop at Sainsbury’s in the first half, responding to our clear focus on quality, price and innovation, and food transactions grew ahead of the market1
- Positive momentum across the business: 70 new and improved food ranges; 112 Argos stores open in Sainsbury’s; exceeded cost savings target and will now deliver £540 million over three years ending 2017/18
- Continue to be competitive on price; customers don’t have to wait for a promotion to get good value
- Strong growth in Groceries Online, up 7.2% and Convenience, up 8.2%
- General Merchandise growing market share in a challenging market2
- Our clothing business continues to outperform the market, with 6.8% sales growth3
- Continued progress at Sainsbury’s Bank
- Well-developed plan to deliver at least £500 million in cost savings over three years from 2018/19
Financial Summary
- Group sales of £16,310 million, up 17%, primarily reflecting the full consolidation of Argos in H1 2017/18
- Like-for-like sales (excl. fuel)4 up 1.6%
- Underlying profit before tax of £251 million, down 9%, reflecting previously guided price investment, wage cost inflation and consolidation of Argos H1 losses, partly offset by synergies and cost savings
- EBITDA synergies of £25 million (£23 million EBIT) in H1 2017/18; on track to deliver £160 million EBITDA (£142 million EBIT) synergy target from Argos acquisition six months ahead of schedule
- Underlying earnings per share down 22%, reflecting a full period’s dilution impact of new shares issued to Home Retail Group plc shareholders on acquisition
- Strong balance sheet, with lease-adjusted net debt to EBITDAR down to 3.4x versus 4.0x a year ago
- Interim dividend of 3.1 pence per share in line with policy of paying 30% of prior full year dividend
- Outlook for full year underlying profit expectation remains in line with current market consensus5
*Variation between Business Performance and Statutory Reporting is due to items excluded from underlying results
- Profit before tax was £220 million. The prior year benefited from a £111 million one-off property gain from Nine Elms and £98 million profit from the sale of the pharmacy business in H1 2016/17
Commenting on the Interim Results 2017, Mike Coupe, Group Chief Executive of J Sainsbury plc, said:
"We have delivered a good performance across the Group in the last six months, with more customers choosing to shop at Sainsbury’s in the first half than ever before. We are now three years into delivering our differentiated strategy and are seeing clear results.
“We are adapting to meet customers’ changing shopping habits and, as a result, we are seeing positive momentum across the business. This half we have updated and improved 70 of our food ranges, covering around 40% of our food sales; improved our offer across 15% of our supermarket space and opened a further 73 Argos stores in Sainsbury’s, giving customers more reasons to shop at Sainsbury’s.
“We continue to focus on offering our customers great value, supported by our removal of multibuys. Customers can shop at Sainsbury’s knowing they get good value every day without having to wait for products to be on promotion. We are also collaborating with suppliers and working hard within our own business to reduce our costs and limit the impact of price inflation on our customers.
“We are integrating Argos at pace: we have 112 Argos stores open in Sainsbury’s supermarkets and will have 165 open by Christmas, in addition to nearly 200 digital collection points across our stores. We are rolling out Click & Collect for Argos and Tu clothing to 100 Sainsbury’s Locals and Argos Fast Track same-day delivery and collection are now our fastest growing channels. We are on track to deliver our £160 million EBITDA synergy target from the Argos acquisition six months ahead of schedule.
“Both Groceries Online and Convenience sales grew strongly, up by over seven per cent and over eight per cent respectively and General Merchandise and Clothing both outperformed the market and grew market share. We have exceeded our cost savings target as a Group, saving £100 million this half, which gives us the flexibility to increase pay for our store colleagues and improve our customer offer while delivering returns to shareholders.
“We recently launched our Living Well Index, a long-term study which helps us understand our customers better. The results of this, combined with our customer data, will influence some of the choices we make around how we best serve our colleagues, customers and communities in the future.”
Outlook
While the market remains competitive, we are well placed to navigate the external environment and we remain focused on delivering our strategy. The outlook for the full year underlying profit expectation remains in line with current market consensus5.
Quarterly Trading Statement data
- Unless otherwise stated all sales figures contained in this trading statement are stated including VAT
- The sale of our Pharmacy business to Lloyds Pharmacy completed on 31 August 2016. The impact of this disposal is excluded from like-for-like sales for a period of one year from this date
Notes:
- Nielsen Panel (Total Grocery), rolling 12 weeks to 9 September 2017
- BRC non-food non-clothing market, 28 weeks to 23 September 2017
- Kantar Worldpanel (52 weeks ended 27 August 2017)
- Includes all of Argos’s sales for H1 2016/17 for comparative purposes but excludes the impact of the sale of our pharmacy business to Lloyds Pharmacy in August 2016
- 2017/18 UPBT consensus estimate of £572 million, as published on 21 June 2017 on www.j-sainsbury.co.uk/investors/analyst-consensus
- Defined in Alternative Performance Measures on page 51
- General Merchandise, Clothing and Total Retail sales growth performances include Argos in the prior year base
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.
Sainsbury's will report its 2017/18 15 week Third Quarter Trading Statement at 07:00 (BST) on 10 January 2018.
A results presentation for analysts and investors will be held at 09:30 on 9 November 2017.
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 678 1161 (or +44 (0)1296 311 600 if you are unable to use the primary number). The pass code for the event is 734 648. 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.