The Lemon Fool

We note recent media speculation regarding a possible sale of Sainsbury's Bank. We set out a clear five year plan for Sainsbury's Bank at our Capital Markets Day in September 2019 and confirmed this plan as part of our Interim results and strategy update on 5th November 2020. We are on track to deliver that plan despite the impact of COVID-19 and expect to deliver a profit in the second half of this financial year. We have received some very preliminary expressions of interest in the Bank, but this does not mean anything will come of these discussions. Our management team remains focused on delivering the plan.

Having considered this issue, particularly since the announcement of a second national lockdown in England, the Board of J Sainsbury plc has chosen to forgo the business rates relief on Sainsbury's stores granted by the UK Government and the Devolved Administrations since March.

Sainsbury's welcomed the Chancellor's announcement in March that all retail, hospitality and leisure businesses in England would be given a business rates holiday for 12 months. At that time and at the time of our preliminary results in April, we had limited visibility of the nature and extent of the financial impact on the business of COVID-19. Our base case assumption for the 2020/21 financial year was that the costs of protecting customers and colleagues and the negative impacts of COVID-19 on financial services profits, fuel, general merchandise and clothing sales would be broadly offset by stronger grocery sales and around £450 million of business rates relief.

Dod101 wrote:I missed it but apparently Morrisons has also agreed to make the business rates payments.

Strong Q3 and Christmas performance

· Christmas like-for-like sales up 9.3 per cent 1

· Q3 like-for-like sales up 8.6 per cent (excl. fuel), with total retail sales up 6.8 per cent (excl. fuel)

· Grocery sales grew 7.4 per cent, with Groceries Online up 128 per cent

· General Merchandise sales grew by 6.0 per cent, with Argos sales up 8.4 per cent

· Clothing sales grew by 0.4 per cent

· Total digital sales grew by 81 per cent, 44 per cent of total sales

· We now expect, after forgoing business rates relief of £410 million, to report underlying profit before tax (UPBT) of at least £330 million in the financial year to March 2021 (financial year to March 2020: £586 million)

Simon Roberts, Chief Executive of J Sainsbury plc, said: "As we enter our third phase of tighter restrictions and national lockdowns, my number one priority remains keeping our colleagues and customers safe. The last few months have been really tough for many people and we are all dealing with a lot of change and uncertainty again. Given these challenging circumstances, we really focused on doing the best possible job for our customers this Christmas. I would like to say a huge thank you to every one of my colleagues, including the 68,000 colleagues we have recruited into Sainsbury's and Argos since March, for the outstanding service you gave our customers.

"We made a strong start to delivering our Food First plan and we are also clear on the opportunities to further improve our offer as we look ahead for 2021. At Christmas we focused on offering our customers great prices, great quality and great service and I feel really proud that Sainsbury's customer satisfaction scores were the highest ever in the key Christmas week. We have started the new year with a strong value offer, with Price Lock currently on over 2,500 everyday products.

"Many customers had to change their Christmas plans at the last minute and we sold smaller turkeys and more lamb and beef than normal. While people had smaller gatherings, they still treated themselves, with Taste the Difference sales up 11 per cent. Premium champagne sales were up 52 per cent, Taste the Difference party food was popular throughout December and people did more home baking than usual with mincemeat sales up 24 per cent. Customers still wanted New Year's Eve at home to feel special and we sold a record number of steaks.

"More customers bought their food online than ever before and we delivered 1.1 million orders in the ten days to Christmas, double the number of last year. Argos sales were up over eight per cent with Fast Track home delivery and Click & Collect beating expectations for Black Friday and Christmas.

"We are delighted that our 'Help Brighten a Million Christmases' campaign raised £6 million in just two weeks for over 800 local charitable partners as well as Comic Relief and FareShare. We are also creating another £1 million local community fund for all our stores to donate to charities and other good causes in their local area and we are continuing to support the government's free school meal vouchers scheme.

"We remain focused on delivering the plan we outlined in November and look forward to providing a further update on early progress at our Preliminary Results in April ."

The impact of the pandemic on sales, colleagues and costs adds additional uncertainty to our financial outlook for the remainder of the year. However, after forgoing business rates relief of £410 million2 we now expect to report underlying profit before tax (UPBT) of at least £330 million in the financial year to March 2021 (financial year to March 2020: £586 million).

Q1 like-for-like sales up 1.6 per cent (excl. fuel)
Total retail sales up 1.6 per cent (excl. fuel), two-year growth 10.3 per cent
Grocery sales up 0.8 per cent, two-year growth 11.3 per cent
Groceries Online sales up 29 per cent, two-year growth 142 per cent
General Merchandise sales down (1.4) per cent, two-year growth 5.6 per cent
Clothing sales up 57.6 per cent, two-year growth 15.5 per cent
Reinvesting benefits of stronger sales growth and now expect underlying profit before tax of at least £660m


Summary and outlook

Sales of Grocery, General Merchandise and Clothing were all higher than our expectations throughout the quarter. Grocery sales benefited from higher in-home consumption due to continued COVID-19 restrictions. In addition, we continued to outperform competitors and grow market share, reflecting improved value, more innovation and better customer service as we make strong progress in putting food back at the heart of Sainsbury’s. General Merchandise sales were lower than last year’s elevated levels but ahead of our expectations, despite global supply challenges which are likely to continue for the remainder of the year.

We are using some of the profit benefit of our sales outperformance to accelerate our investment plans across the customer offer, particularly to further improve our value position. Yesterday we announced an additional £50 million investment in targeted price reductions focused on the centre of the plate and everyday essentials. We also have further tough comparables ahead as restrictions continue to ease and customer behaviour normalises. However, we now expect to report underlying profit before tax of at least £660 million in the financial year to March 2022, with progress weighted towards the first half.

idpickering wrote:First Quarter Trading Statement for the 16 weeks to 26 June 2021

We are using some of the profit benefit of our sales outperformance to accelerate our investment plans across the customer offer, particularly to further improve our value position. Yesterday we announced an additional £50 million investment in targeted price reductions focused on the centre of the plate and everyday essentials. We also have further tough comparables ahead as restrictions continue to ease and customer behaviour normalises. However, we now expect to report underlying profit before tax of at least £660 million in the financial year to March 2022, with progress weighted towards the first half.

https://www.about.sainsburys.co.uk/news ... q1-results

bluedonkey wrote:£50m investment in targeted price reductions? Investment?!
Translation: margins are under pressure and the competition is hotting up.

absolutezero wrote:

bluedonkey wrote:£50m investment in targeted price reductions? Investment?!
Translation: margins are under pressure and the competition is hotting up.

Supermarkets: A low margin sector with a low return on capital in a very competitive market with little brand loyalty these days.
No thanks.

murraypaul wrote:

absolutezero wrote:

bluedonkey wrote:£50m investment in targeted price reductions? Investment?!
Translation: margins are under pressure and the competition is hotting up.

Supermarkets: A low margin sector with a low return on capital in a very competitive market with little brand loyalty these days.
No thanks.

Especially with more people switching to online delivery.
Less loyalty, as people can very easily compare prices instantly, rather than already being in your shop, so likely to buy out of intertia, and less opportunity for upselling.

Sainsbury's (idpickering) wrote:First Quarter Trading Statement for the 16 weeks to 26 June 2021
Clothing sales up 57.6 per cent, two-year growth 15.5 per cent

Sainsbury's shares surged on Monday following a report that US private equity firm Apollo is considering a bid for the UK supermarket chain.
According to The Sunday Times, Apollo is circling Sainsbury's with a view to possibly launching bids of more than £7bn, after scouring the industry for takeover targets.

The Times said Apollo's interest in Sainsbury's was understood to be "exploratory". That its interest is being made public at this stage may also act as a deterrent to any deal, it said.

Apollo, which was outbid for Asda last year, is still in talks to join the Fortress-led consortium bidding for rival supermarket chain Morrisons. The Times said any involvement in that deal may preclude a move for Sainsbury's.

At 1020 BST, the shares were up 11.9% at 329.77p.

Broker Shore Capital referred to the weekend press report as "flaky".

On 17 November 2020, J Sainsbury plc ("Sainsbury's") announced that it had received some expressions of interest in a possible acquisition of Sainsbury's Bank.

Whilst the Board of Sainsbury's believe that it was in the best interests of shareholders to explore these expressions of interest, it has concluded that these do not offer better value for shareholders than will be realised through retaining Sainsbury's Bank. Accordingly, all such discussions have now ended.

We continue to make progress strengthening and simplifying our Financial Services business in line with our strategy and we remain comfortable with consensus profit forecasts for the division1.

Financial Highlights

· Grocery sales grew by 0.8 per cent versus H1 20/21 and 9.1 per cent versus H1 19/20 and we gained market share, driven by improved value, innovation and service, supported by customers continuing to eat at home more

· General Merchandise sales reduced by 5.8 per cent versus H1 20/21, as expected against strong lockdown and seasonal sales comparatives, but grew 1.1 per cent versus H1 19/20

· Strong digital sales of £5.8 billion, consistent with H1 20/21 at 39 per cent of retail sales

· Statutory Group sales (excluding VAT) up 5.3 per cent, with fuel sales up 62.7 per cent

· Underlying profit before tax of £371 million, up 23 per cent versus H1 20/211. Up 56 per cent versus H1 19/20, reflecting higher grocery sales and effective cost reduction programmes, particularly at Argos

· Statutory profit before tax of £541 million reflects significantly lower restructuring and impairment costs versus H1 20/21 and £181 million of exceptional income from settling legal disputes

· Strong retail free cash flow of £554 million1. On track to meet free cash flow and net debt reduction targets

· Interim dividend of 3.2 pence

· We continue to expect to report underlying profit before tax of at least £660 million in the financial year to March 2022

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 years1

· Value: We have invested in the value of our food ranges ahead of the market2 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 weeks3

· 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 ago3. 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 20224

Around 2,000 jobs have been put at risk after Sainsbury's announced plans to shut 200 in-store cafes.

The supermarket chain also confirmed it is launching consultations with an undisclosed number of staff regarding plans to close less popular hot food counters in 34 stores and changes to how it runs bakeries in 54 stores.