J Sainsbury plc · LSE:SBRY
J Sainsbury — FY2020/21 Earnings Presentation
61 slides from J Sainsbury's earnings presentation, April 2021
Slide 1: Preliminary Results 2020/21
Preliminary Results 2020/21
Slide 2: Simon Roberts, Chief Executive Officer
Simon Roberts Chief Executive Officer
Slide 3: Kevin O’Byrne, Chief Financial Officer
Kevin O’Byrne Chief Financial Officer
Slide 4: Agenda
Agenda 01 02 Financial highlights Operational performance 4 J Sainsbury plc Preliminary Results 2020/21
Slide 5: Retail sales growth by category
Financials Operational Performance Retail sales growth by category Grocery General Merchandise Clothing Total Retail FY Sales FY Sales FY Sales FY Sales growth 1 up 7.8% up 8.3% down 8.5% up 7.3% 9.2% 8.5% 10.5% 17.6% 4.2% 6.8% 0.4% 5.2% 7.4% 7.1% Q1 Q2 Q3 Q4 5.1% 7.2% 7.6% Q1 Q2 Q3 Q4 6.0% (7.5)% 7
Slide 6: Group performance overview
Financials Operational Performance Group performance overview Retail Financial Services Underlying profit Statutory profit/ operating profit 1 operating profit 1 before tax loss before tax down 22% down 39% 938 48 586 255 730 FY 356 19/20 FY 19/20 FY 20/21 FY FY FY 20/21 FY FY 19/20 20/21 19/20 20/2
Slide 7: Group performance overview
Financials Operational Performance Group performance overview Free cash flow Working capital Net debt Dividend movement excluding leases per share 1 up 28% down £539m 10.6p 10.6p 784 453 1,179 7.3p 7.4p 611 640 3.3p 3.2 p FY 20/21 FY FY FY FY FY Interim Special Interim Final 19/20 20/21 19/20 19/20
Slide 8: Underlying profit before tax
Financials Operational Performance Underlying profit before tax Retail COVID costs H1 H2 FY UPBT YoY movement £m 20/21 20/21 20/21 £m Colleague costs 1 (179) (139) (318) Operating costs 2 (84) (29) (113) 586 Other (28) (26) (54) Total Retail COVID costs 3 (291) (194) (485) (208) Interest Retail (69)
Slide 9: Financial Services: UPBT bridge
Financials Operational Performance Financial Services: UPBT bridge UPBT waterfall H1/H2 Split £m £m COVID 34 provision (H1) 48 H1 20/21 (21) H2 FY 19/20 Reduced Cost action 20/21 UPBT One-off FY 20/21 lending Funding costs Travel debt sale (H2) UPBT Money and ATMs (55) Impairment impacts 9 J Sainsbu
Slide 10: Financial Services: performance drivers and coverage
Financials Operational Performance Financial Services: performance drivers and coverage Customer assets Credit provisions Total Capital Ratio £bn % down 27% Unsecured lending Coverage Ratio 4.9% 6.3% 7.4 £5.8bn 20.2 % £0.3bn 17.0 % 2.7 5.4 £4.4bn 1.9 Personal loans £0.3bn 2.0 1.4 Credit cards 1.9 1.
Slide 11: Items excluded from underlying results
Financials Operational Performance Items excluded from underlying results FY FY £m 2020/21 2019/20 Guidance • Restructuring, impairment Restructuring programmes 1 (423) (202) and integration one-off costs Impairment charges (Retail and FS) 2, 3 (220) (126) of £900m-£1bn from FY20/21 to FY23/24 (c. £
Slide 12: Net debt and Retail free cash flow
Financials Operational Performance Net debt and Retail free cash flow FY FY £m – IFRS 16 basis 2020/21 2019/20 Working capital movement Net cash from operating activities 1,809 1,453 356 of which working capital movements 453 (97) 550 Capital expenditure (568) (599) Disposal proceeds 1 49 224 • Sain
Slide 13: Retail free cash flow
Financials Operational Performance Retail free cash flow Retail free cash flow £m £500m+ £500m+ average average 784 611 FY FY FY FY FY FY 19/20 20/21 21/22E 22/23E 23/24E 24/25E 13 J Sainsbury plc Preliminary Results 2020/21
Slide 14: Balance sheet targets
Financials Operational Performance Balance sheet targets • Previous net debt reduction of £750m+ from 18/19 to 22/23 updated to £950m+ Net debt exc. Lease liabilities 1 reduction by 22/23 £m • Medium leverage reduction target: Net debt/EBITDA 2 less than 3x 2,125 (£603m) 1,522 (£950m)+ 1,179 640 Tar
Slide 15: Bridge to 21/22 UPBT
Financials Operational Performance Bridge to 21/22 UPBT Drivers of 21/22 UPBT Guidance • 2021/22 UPBT ahead of £m • Ongoing COVID costs 2019/20, comfortable with • Colleague costs consensus of around £620m 1 • Financial Services • Financial Services to return to profit in 21/22 586 • Net finance cos
Slide 16: Summary and Outlook
Financials Operational Performance Summary and Outlook Strong performance Outlook • Excellent execution through a challenging year • 2021/22 UPBT ahead of 2019/20, comfortable with consensus of around £620m1 • Strong, profitable digital sales growth in both Sainsbury’s and Argos • Average free cash
Slide 17: Simon Roberts, Chief Executive Officer
Simon Roberts Chief Executive Officer
Slide 18: A year that has made us stronger
Financials Operational Performance A year that has made us stronger A year trading A strong operating A strong start Bolder choices, through COVID performance towards delivering bigger decisions, on our priorities good momentum Food First More competitive and Brands that Deliver better positioned fo
Slide 19: Building momentum, closer to customers
Financials Operational Performance Building momentum, closer to customers 12 million Increased Increased orders delivered to online delivery Uber Eats online delivery Market leading slots to Product elderly and slots to Deliveroo purchasing vulnerable 650,000 partnerships Safety CSAT 850,000 limits
Slide 20: Strong digital platform, enabling scale transformation
Financials Operational Performance Strong digital platform, enabling scale transformation Total Digital Groceries online Argos Digital Smartshop Nectar Sales up Sales up Sales up Sales up Users up 102% 120% 68% 173% 2.9m 42% 3% 90% 30% 7.4m C&C 3% 14% Delivery 12% 0.3% 60% 4.5m 22% 8% 14% FY FY FY H
Slide 21: Strengthened customer satisfaction
Financials Operational Performance Strengthened customer satisfaction Supermarkets Online Customer satisfaction index 1 Customer satisfaction index 1 Availability Friendliness Speed Sainsbury’s Sainsbury’s +3 % +7% +13% YoY 2 YoY2 YoY 2 Tesco Asda Tesco Morrisons Asda Morrisons Q4 Q1 Q2 Q3 Q4 Q4 Q1
Slide 22: Growing ahead of the market
Financials Operational Performance Growing ahead of the market Grocery volume growth1 FY 20/21 12% Lidl Morrisons 8% Total Sainsbury’s grocers Tesco Aldi Asda 4% 0% 1 Nielsen Panel volume growth YoY. Total FMCG (excluding Kiosk & Tobacco), 6 March 20/21 52 week data. Market Universe: Total Outlets.
Slide 23: General merchandise growth, clothing momentum
Financials Operational Performance General merchandise growth, clothing momentum Argos Sainsbury’s GM Clothing 18.1% 14.8% 4.2% 0.4% Q1 Q2 Q3 Q4 10.7% 10.9% 8.4% (7.5)% Q1 Q2 Q3 Q4 (5.4)% (6.9)% Q1 Q2 Q3 Q4 (9.3)% (26.7)% 23 J Sainsbury plc Preliminary Results 2020/21
Slide 24: Driven by our passion for food
Financials Operational Performance Driven by our passion for food Together we serve and help every customer 24 J Sainsbury plc Preliminary Results 2020/21
Slide 25: In the next 3 years we will transform our business
Financials Operational Performance In the next 3 years we will transform our business We are clear on our priorities • Better value and innovation • Customer and profit focus • Structurally lower operating • Supporting the core food costs to fuel investment in • Underpinned by buying business the co
Slide 26: Delivering against our plan
Financials Operational Performance Delivering against our plan Food back at the heart of Sainsbury’s Portfolio brands supporting food, delivering for customers and shareholders in their own right Structurally lower cost to sales ratio (by at least 200bps) Pursue partnerships or outsource where faste
Slide 27: 8 key metrics
Financials Operational Performance 8 key metrics Delivering for customers and driving stronger financial outcomes Operational Financial • Grocery market share performance • UPBT growth • Strong customer satisfaction scores • 200bps+ reduction in retail operating cost to sales • Maintain strong colle
Slide 28: Better value and innovation
Financials Operational Performance • Improve real and perceived value • Deliver Net Zero commitment for money • Tailor price, proposition and operations • Increase innovation pace to catchments and local customers • Better value and innovation • Grow Online capacity and extend • Adapt supermarket fo
Slide 29: Delivering better value to customers: Price Lock
Financials Operational Performance Delivering better value to customers: Price Lock Price Lock Biggest ever Price Lock in Jan 2021 2,500+ SKUs 2,500 SKUs 2,000 • Focus on stability of everyday prices • Primary customers 1,500 1,000 500 0 FY FY FY 18/19 19/20 20/21 29 J Sainsbury plc Preliminary Resu
Slide 30: Delivering better value to customers: Centre of plate
Financials Operational Performance Delivering better value to customers: Centre of plate Core, high volume investment Halo driving categories • Focus on core own brand products, especially Fresh categories, e.g. Meat, Fish and Poultry • Primary customers 30 J Sainsbury plc Preliminary Results 2020/2
Slide 31: Sainsbury’s Quality, Aldi Price Match
Financials Operational Performance Delivering better value to customers: Sainsbury’s Quality, Aldi Price Match Sainsbury’s Quality, Aldi Price Match 250+ SKUs • Focus on Fresh: over 80% of volume • Low Prices and Entry Price Point • Secondary customers 31 J Sainsbury plc Preliminary Results 2020/21
Slide 32: Early results: Significant improvement in value, strong customer response
Financials Operational Performance Early results: Significant improvement in value, strong customer response Price index 1 Volume uplift 3 Total Centre of plate 2 FY 21 vs FY20 FY 21 vs FY20 Meat, fish and poultry vs improved improved up 50bps 600bps 15% vs improved improved 280bps 890bps Pre- inves
Slide 33: Early results: Price investment driving volume uplift
Financials Operational Performance Early results: Price investment driving volume uplift Halo benefit from price investment Key drivers of halo Net P&L position Net price Halo investment Gross price Elasticity benefit investment benefit 34 J Sainsbury plc Preliminary Results 2020/21
Slide 34: Food Innovation: Transforming new product development
Financials Operational Performance Food Innovation: Transforming new product development Tripling innovation Delivering across Food First New own brand SKUs more than Trade Up Value Net Zero triple 1,900 600 Target FY FY 19/20 21/22 35 J Sainsbury plc Preliminary Results 2020/21
Slide 35: Food Innovation: Spring / Summer launches
Financials Operational Performance Food Innovation: Spring / Summer launches 36 J Sainsbury plc Preliminary Results 2020/21
Slide 36: Suppliers supporting innovation and value
Financials Operational Performance Suppliers supporting innovation and value Transforming supplier relationships: • Stronger partnerships • Increased investment behind Sainsbury’s • Higher volumes • Responsiveness to innovation Top 10 supplier: “We have jointly demonstrated that we can launch projec
Slide 37: Strong online market share gains
Financials Operational Performance Strong online market share gains Biggest online market share winner1 Orders more than doubled Share of top 5 competitors 5.6% 6.0% 950,000 Morrisons Online 17.5% 18.7% 9.5% 14.6% Ocado 850,000 850k+ orders 750,000 23.9% 20.6% 19.9% Asda Online 650,000 15.5% 18.1% 2
Slide 38: Unique breadth of online grocery options for customers
Financials Operational Performance Unique breadth of online grocery options for customers GOL GOL Chop Chop Deliveroo / Delivery Click & Collect Uber Eats Stores 253 321 43 c.200 Cities & towns 98% UK population 98% UK population 17 37 Average basket size c.£100 c.£100 £30-£35 £20-£25 39 J Sainsbury
Slide 39: Growing online momentum, growing profitably
Financials Operational Performance Growing online momentum, growing profitably Online sales Online sales growth up 120% £3.6bn 147% 129% 123% £1.7bn FY FY 87% 19/20 20/21 Q1 Q2 Q3 Q4 Online profit contribution Profit contribution margin 4 times 2 times FY FY FY FY 19/20 20/21 19/20 20/21 40 J Sainsb
Slide 40: Stronger online grocery economics
Financials Operational Performance Stronger online grocery economics Items picked per hour (IPH) Orders per van per day +14% -12% +13% up +10 % 38% FY FY FY FY FY FY FY 16/17 17/18 18/19 19/20 20/21 19/20 20/21 Basket size Other operating cost/sales1 up down 13% 440bps FY FY FY FY 19/20 20/21 19/20
Slide 41: Help everyone eat better
Financials Operational Performance We make eating well Healthier, tastier, affordable, easy more sustainable food and the best thing you’ve ever tasted cooked at home, enjoyed together Help everyone eat better Because all of us could eat a little better No matter how much time or money people have 4
Slide 42: Net Zero
Financials Operational Performance Net Zero Reduce Healthy & Reduce Reduce carbon emissions sustainable diets food waste plastic packaging within own operations for all by 50% by 2030 by 50% by 2025 to Net Zero by 2040 GHG emissions Healthy products sold Food waste Food plastic packaging Down YoY Fl
Slide 43: Customer and profit focus
Financials Operational Performance • Customer and profit focus • Supporting the core food business Focus on food, coalition Reduce cost to serve Deliver 5 year plan and data monetisation Improve profit delivery 44 J Sainsbury plc Preliminary Results 2020/21
Slide 44: Nectar: strong digital platform, growing digital customer base
Financials Operational Performance Nectar: strong digital platform, growing digital customer base Digital Nectar Nectar360: delivering for suppliers 10m+ 7.4m+ ambition 6 million digital impressions served to collectors 119 thousand households with 7.78% conversion to brand Oct Mar £1.25 2019 2021 R
Slide 45: Nectar: extending reach and strengthening the coalition
Financials Operational Performance Nectar: extending reach and strengthening the coalition Integration of Argos Launch of British Airways partnership Argos Nectar spend participation ahead of plan Linked Nectar accounts Actual Forecast Sep 2020 Mar 2021 46 J Sainsbury plc Preliminary Results 2020/21
Slide 46: Argos: Over 3 million new customers
Financials Operational Performance Argos: Over 3 million new customers Broad-based growth Flexible fulfilment options Category size Toys 6% 100% Other 4% 80% Home delivery Domestic appliances 18% 60% Consumer electronics 33% 40% Click and Collect Home and furniture 18% (paid online) Seasonal, sport,
Slide 47: Argos transformation: lower cost to serve by £105m
Financials Operational Performance Argos transformation: lower cost to serve by £105m Standalone Argos stores Collection Local stores in Sainsbury’s points fulfilment centres 570 450 430 to 401 c.405 to 5001 336 4601 c.340 c.330 306 306 32 281 1011 FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY 19/
Slide 48: Argos 2021/22: prudent sales outlook, higher profits
Financials Operational Performance Argos 2021/22: prudent sales outlook, higher profits Drivers of 21/22 UPBT £m Sales: Improved margin rate: • Caution on consumer spending proposition benefits • Focus on profitable sales and Cost transformation: categories • Reduced rent and rates • Disciplined pro
Slide 49: Transforming Habitat reach and scale
Financials Operational Performance Transforming Habitat reach and scale • Habitat brought together with Increase in Habitat Mix Sainsbury’s and Argos • Lead Home and Furniture 12% Home brand 31% 19% Branded • Over 1,000 new Habitat SKUs 19% • Improved market position for home and furniture 68% Habit
Slide 50: A stronger clothing business
Financials Operational Performance A stronger clothing business Online sales Strong full price sales growth +65% 18% +15% 8% Full Price (9)% Sales FY FY Total 19/20 20/21 Sales Online participation FY 20/21 Sales growth 51 J Sainsbury plc Preliminary Results 2020/21
Slide 51: Financial Services
Financials Operational Performance Financial Services Material short term COVID-19 impact but on track to deliver FY24 strategic commitments 1 2 3 4 5 6 Stop putting Improve Financial Transform the Reduce risk Focus on cash into returns services cash cost base profile to group Sainsbury’s Financial
Slide 52: Strong Financial Services platform
Financials Operational Performance Strong Financial Services platform Customer NPS Over 77% Argos Financial top quartile for Banks Bank customers have Services funded over a nectar card £1bn Argos sales Two thirds Bank 60% of Car and Home 98% of Storecard sales customers registered insurance custome
Slide 53: Structural change to accelerate cost reduction
Financials Operational Performance Structural change to accelerate cost reduction • Reduce operating costs to fuel investment in the core • Transform our approach to costs and radically simplify our organisation • Structurally lower operating costs to fuel investment in • Reduce retail operating cos
Slide 54: Strategic cost reduction
Financials Operational Performance Strategic cost reduction Reduce retail operating costs/ sales % by 200 bps+ Accelerated cost saving plans £m • Addressing inflationary cost pressures and Retail op. costs/ sales % volume related increases • Meeting increased groceries online demand • Creating addit
Slide 55: Ambitious cost programme on track
Financials Operational Performance Ambitious cost programme on track Key cost savings programmes Technology improvement Centrals & Organisation Marketing efficiencies Property rationalisation Integrated logistics & supply chain Retail projects: • Argos transformation • Counters • Groceries Online •
Slide 56: Key cost saving programmes
Financials Operational Performance Key cost saving programmes £105m £70m-100m £60m Argos store transformation and Centrals and Organisation support costs Counters fulfilment model • Reduction of central support roles • Lower cost to serve • Store rationalisation • Office space reduced • Reduced wast
Slide 57: Moving at pace to change the business
Financials Operational Performance Moving at pace to change the business Food back at the heart of Sainsbury’s Portfolio brands supporting food, delivering for customers and shareholders in their own right Structurally lower cost to sales ratio (by at least 200bps) Pursue partnerships or outsource w
Slide 58: Delivering for shareholders
Financials Operational Performance Delivering for shareholders Profit • Cost transformation: 200bp+ reduction in cost to sales Profit inflection inflection • Working with suppliers to unlock value • Funding stronger food performance • 2021/22 UPBT higher than 2019/20 1 Profit • Reducing cost to serv
Slide 59: 8 key metrics
Financials Operational Performance 8 key metrics Delivering for customers and driving stronger financial outcomes Operational Financial Grocery market share performance UPBT growth Strong customer satisfaction scores 200bps+ reduction in retail operating cost to sales Maintain strong colleague engag
Slide 60: In the next 3 years we will transform our business
Financials Operational Performance In the next 3 years we will transform our business We are clear on our priorities • Better value and innovation • Customer and profit focus • Structurally lower operating • Supporting the core food costs to fuel investment in • Underpinned by buying business the co
Slide 61: Q&A
Q&A