J Sainsbury Plc · LSE:SBRY
J Sainsbury — H1 2022/23 Earnings Presentation
69 slides from J Sainsbury's earnings presentation, 2022
Slide 1: Interim Results 2022/23
Interim Results 2022/23
Slide 2: Simon Roberts, Chief Executive Officer
Simon Roberts Chief Executive Officer
Slide 3: Agenda
Agenda 01 Progress against priorities 02 Financial highlights 03 Strategic highlights 3 J Sainsbury plc Interim Results 2022/23
Slide 4: Our priorities
Progress against priorities Financials Strategic highlights Our priorities • Better value and innovation • Customer and profit focus • Structurally lower operating • Underpinned by buying • Supporting the core food costs to fuel investment in benefits and lower cost business the core to serve • Cutt
Slide 5: We are delivering on our plan for 22/23
Progress against priorities Financials Strategic highlights We are delivering on our plan for 22/23 Sustain Drive Invest Strong In stores, strengthen Further Trade Up Value position customer service Build on Deliver General Embed Cost Savings target Merchandise Plan for Better transformation 5 J Sai
Slide 6: A challenging backdrop, but delivering for stakeholders
Progress against priorities Financials Strategic highlights A challenging backdrop, but delivering for stakeholders Customers Colleagues Suppliers Shareholders • Relentless focus on value • First supermarket to offer • Strong partnerships and • Profits higher than second pay rise collaboration pre-p
Slide 7: Strategy is delivering for customers and colleagues
Progress against priorities Financials Strategic highlights Strategy is delivering for customers and colleagues Consistently inflating behind the market Only full-choice grocer to grow volume share vs H1 19/20 2 Total ASP Inflation 1 Morrisons Market Sainsbury’s Sainsbury’s Tesco P8 P9 P10 P11 P12 P
Slide 8: Cost savings building resilience and competitive advantage
Progress against priorities Financials Strategic highlights Cost savings building resilience and competitive advantage We are doubling the run rate of cost savings Good profit growth Cost savings, £m £m 1,310 630- x2 586 690 623 3 years to 19/20 3 years to 23/24 FY 19/20 FY 22/23F 8 J Sainsbury plc
Slide 9: Kevin O'Byrne, Chief Financial Officer
Kevin O’Byrne Chief Financial Officer
Slide 10: Retail sales growth by category
Progress against priorities Financials Strategic highlights Retail sales growth by category Year-on-year Total Retail 1 3.1 % Grocery General Merchandise Clothing 3.8 % 1.2 % Q1 Q1 Q1 Q2 Q2 Q2 (0.2) % H1 (4.5) % (1.3)% Q1 Q2 H1 22/23 (10.1) % 39.5% (2.4) % (11.2) % H1 H1 H1 +0.2 % (6.1) % (6.0)% 4.4
Slide 11: Retail sales growth by category (year-on-three-year)
Progress against priorities Financials Strategic highlights Retail sales growth by category Year-on-three-year Total Retail 1 6.7 % Grocery General Merchandise Clothing 5.4 % 10.1 % Q1 Q2 3.9 % 8.7 % Q1 Q2 H1 (3.6) % +5.9% 0.8 % H1 22/23 25.8% Q1 Q2 (6.2) % Q1 Q2 H1 H1 H1 9.2% +9.3 % (5.0) % +2.5 %
Slide 12: Group performance overview
Progress against priorities Financials Strategic highlights Group performance overview Retail underlying Financial Services Underlying profit Statutory profit operating profit operating profit 1 before tax before tax 2 down 9% YoY Flat YoY down 8% YoY down 29% YoY 523 19 19 371 527 477 340 376 HY HY
Slide 13: Group performance overview
Progress against priorities Financials Strategic highlights Group performance overview Retail free Working capital Net funds /(debt) Earnings Dividend cash flow movement excluding leases per share1 per share 759 360 361 12.2p 3.9p 11.2p 3.2p 554 135 HY HY 21/22 22/23 HY HY HY HY HY HY HY HY 21/22 22
Slide 14: Financial Services
Progress against priorities Financials Strategic highlights Financial Services UPBT YoY movement Customer Assets £m Interest £bn Income Impairment 7.4 Commission 1.9 6.2 & Fee Income Costs 1.6 5.0 5.1 0.8 Mortgages 0.7 0.9 0.8 0.7 Store cards 1.9 0.7 19 19 1.6 1.7 Credit cards 1.5 H1 21/22 H1 22/23
Slide 15: Items excluded from underlying results
Progress against priorities Financials Strategic highlights Items excluded from underlying results Guidance H1 H1 Restructuring, impairment and integration one-off £m 2022/23 2021/221 costs of £900m-£1bn (c. £300m cash) from FY20/21, with the majority by March 2024. Of this, we expect to Restructuri
Slide 16: Net debt and Retail free cash flow
Progress against priorities Financials Strategic highlights Net debt and Retail free cash flow H1 H1 FY • Strong free cash flow reflecting higher grocery sales, and £m 2022/23 2021/22 2021/22 more typical seasonal working capital inflows against last Net cash from operating activities 1,232 1,056 ye
Slide 17: Balance sheet metrics
Progress against priorities Financials Strategic highlights Balance sheet metrics Net debt incl. leases Net debt / EBITDA1, 3 Return on capital employed 2, 3 £m 3.3x 8.4% HY FY HY 3.1x 21/22 21/22 22/23 2.9x 7.7% 6.3% (6,165) (6,345) HY FY HY HY FY HY 21/22 21/22 22/23 21/22 21/22 22/23 (6,759) 1 Ne
Slide 18: Summary and Outlook
Progress against priorities Financials Strategic highlights Summary and Outlook • Strong H1 performance; sales growth strengthening in Q2 • Volume market share gains reflecting investment in customer proposition – Supported by strengthened financial position and cost savings programme • Strong under
Slide 19: Simon Roberts, Chief Executive Officer
Simon Roberts Chief Executive Officer
Slide 20: Better value and innovation
Progress against priorities Financials Strategic highlights • Improve real and perceived value • Deliver Plan for Better commitment for money • Tailor price, proposition and operations • Increase innovation pace to catchments and local customers • Better value and innovation • Grow Online capacity a
Slide 21: Relentless focus on value driving progress
Progress against priorities Financials Strategic highlights Relentless focus on value driving progress Over £500m investment in price by March 2023 • 240 products in Aldi Price • 20% more Own Brand lines • Offering customers Match campaign now in Price Lock personalised offers • Over 90% volumes in
Slide 22: Consistently inflating behind the market
Progress against priorities Financials Strategic highlights Consistently inflating behind the market ASP Inflation of Top 100 products 1 Morrisons Lidl Aldi Tesco Asda Sainsbury’s 0 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2021 2022 1 Nielsen panel data, Top 100 SKUs by retailer. Aver
Slide 23: Our strongest relative value position
Progress against priorities Financials Strategic highlights Our strongest relative value position Price index vs Aldi Price index vs Tesco improved improved 400 bps1 10 bps1 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 21/22 21/22 21/22 21/22 22/23 22/23 21/22 21/22 21/22 21/22 22/23 22/23 Price index vs Asd
Slide 24: Helping customers find value and trade up
Progress against priorities Financials Strategic highlights Helping customers find value and helping them trade up Growth in Economy Own Label; switching Strong performance in Premium Own Label gains from nearly all competitors • Taste the Difference sales up YoY, up 13% Yo3Y 2 Volume switching to o
Slide 25: Strength in Quality and Innovation
Progress against priorities Financials Strategic highlights Strength in Quality and Innovation Quality CSAT ahead of Innovation: on track to launch 1,200 new products this year competitors 1 • +600 new products in H1 Tesco Asda Morrisons • Summer Editions: sales up >30% YoY • Autumn Editions range p
Slide 26: Online
Progress against priorities Financials Strategic highlights Online Orders normalising, customers returning to Sainsbury’s stores Online weekly orders1 and YoY sales growth Retaining more online customers within our own 900,000 Online weekly stores than competitors 2 800,000 orders 700,000 160% 27% 6
Slide 27: Convenience
Progress against priorities Financials Strategic highlights Convenience Sales ahead of pre-pandemic, return to physical channels Convenience sales up 7% versus H1 19/20 Channel sales growth YoY Indexed weekly sales by cluster Sales vs H1 19/20 130 Less urban +20% 1% 120 More urban +12% 110 Supermark
Slide 28: Significant investment to improve stores
Progress against priorities Financials Strategic highlights Significant investment to improve stores Investment in c.90% of supermarkets this year ALL 1 Fresh HFSS landing October 2022 England stores 4 Clothing & GM • Produce >300 • Habitat –creating new merchandising stores a destination 4 2 Home a
Slide 29: Performance resilient versus competitors as customer behaviour changes
Progress against priorities Financials Strategic highlights Performance resilient versus competitors as customer behaviour changes We are seeing less switching Our basket sizes are holding up Our customers are trading down to Aldi and Lidl ahead of all competitors less than those of competitors Net
Slide 30: Ahead of competitors on customer satisfaction
Progress against priorities Financials Strategic highlights Ahead of competitors on customer satisfaction Supermarkets Availability 2 Speed 2 Customer satisfaction index 1 Tesco Asda Morrisons Sainsbury’s Morrisons Sainsbury’s Tesco Sainsbury’s Asda Tesco Quality 2 Colleagues 2 Asda Tesco Morrisons
Slide 31: Strong volume market share performance
Progress against priorities Financials Strategic highlights Strong volume market share performance Only full-choice grocer to grow volume Volume growth ahead of the market share vs H1 19/20 Grocery volume share movement: H1 22/23 vs H1 19/20 1 Q2 22/23 grocery volume growth YoY 2 0.2% Sainsbury’s Sa
Slide 32: Customer and profit focus
Progress against priorities Financials Strategic highlights • Customer and profit focus • Supporting the core food business Focus on food, coalition Reduce cost to serve Simplify and and data monetisation Improve profit delivery strengthen 32 J Sainsbury plc Interim Results 2022/23
Slide 33: Nectar
Progress against priorities Financials Strategic highlights Nectar Growth in digital customers, advancing personalisation Digital Nectar: My Nectar Prices Nectar360: 10m ambition reached Strong performance 10m+ Steady growth in customer • Ahead of plan to deliver digital engagement incremental profi
Slide 34: General merchandise
Progress against priorities Financials Strategic highlights General merchandise Lower cost to serve, better proposition Self-help improvements Availability Affordability driving profitability Argos total JS GM total Value perception2 availability availability Argos operating Argos Tu Habitat (loss)
Slide 35: General merchandise
Progress against priorities Financials Strategic highlights General merchandise Developing our brands proposition Tu Clothing Habitat • Continue to develop and expand Tu brand • Latest campaign ‘Tu & Me’ well received • Driving customer conversion and brand reappraisal • Record season for dresses ca
Slide 36: Argos growing market share in a tough market
Progress against priorities Financials Strategic highlights Argos growing market share in a tough market Argos sales growth by category, Q2 YoY % Volume Market Share differential, Q2 YoY bps1 Consumer electronics Consumer electronics & Technology & Technology Household, Seasonal Household, Seasonal
Slide 37: A stronger, more profitable Tu clothing business
Progress against priorities Financials Strategic highlights A stronger, more profitable Tu clothing business Clothing sales +2.5% Significantly higher vs pre-pandemic full-price sales participation Sales, £m 80% 501 489 64% H1 19/20 H1 22/23 H1 19/20 H1 22/23 37 J Sainsbury plc Interim Results 2022/
Slide 38: Financial Services
Progress against priorities Financials Strategic highlights Financial Services Focused on delivering strategic commitments 1 2 3 Capital self- Improve Financial sufficiency returns services cash generative 4 5 6 Transform Reduce risk Focus on the cost profile to Sainsbury’s base group customer base
Slide 39: Structural change to accelerate cost reduction
Progress against priorities Financials Strategic highlights 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 • Re
Slide 40: Delivering cost savings and building further capacity
Progress against priorities Financials Strategic highlights Delivering cost savings and building further capacity We are doubling the run rate Shift towards ‘end-to-end thinking’ will allow of cost savings us to continue generating cost savings Cost savings, £m 21/22 22/23 23/24 Beyond Functionally
Slide 41: Key cost savings in the first 18 months
Progress against priorities Financials Strategic highlights Key cost savings in the first 18 months Total savings of £730m delivered so far Examples of structural savings delivered so far 1: Reducing our energy consumption Electricity consumption (kWh) Supply chain & Logistics: Cafes and counters: £
Slide 42: Environmental and social sustainability at our core
Progress against priorities Financials Strategic highlights • Driving progress against our targets through the commercial integration of our Plan for Better • Continued focus on our commitment to help everyone eat better • Committed to working as an industry to identify the key issues we Environment
Slide 43: Plan for Better: bold commitments to drive positive change
Progress against priorities Financials Strategic highlights Plan for Better: bold commitments to drive positive change Healthy & sustainable diets At least 85%1 healthy and better for you sales tonnage by 2025 Reduction in Reduction in Reduce packaging & Nature positive Minimise water use Carbon emi
Slide 44: Plan for Better: strong progress tackling food waste
Progress against priorities Financials Strategic highlights Plan for Better: strong progress tackling food waste ‘Best Before’ dates Neighbourly partnership Sainsfreeze removal • Removed ‘best before’ dates on 100 • Completed one year working with • Walk-in freezer concept store more own brand produ
Slide 45: 8 key metrics
Progress against priorities Financials Strategic highlights 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 Mainta
Slide 46: Moving at pace to change our business
Progress against priorities Financials Strategic highlights Moving at pace to change our business Putting our customers first and doing the right thing for our colleagues, our suppliers and every community we serve Food back at the heart of Sainsbury’s Higher food volumes driving operating leverage
Slide 47: Delivering for shareholders
Progress against priorities Financials Strategic highlights Delivering for shareholders • Strong momentum, good progress against priorities Halfway – Improved value position relative to competitors through our – Delivering on cost savings three year plan – Investing where it matters most to customer
Slide 48: Q&A
Q&A
Slide 49: Appendices
Appendices
Slide 50: Guidance for 2022/23
Progress against priorities Financials Strategic highlights Appendix Guidance for 2022/23 Profit Capital allocation • Continue to expect underlying profit before tax in the range of £630m to £690m • We expect capital expenditure to remain in the range of £700 million to £750 in FY 2022/23 million in
Slide 51: Sales growth by quarter
Progress against priorities Financials Strategic highlights Appendix Sales growth by quarter Like-for-like sales growth 2021/22 2022/23 YoY Q1 Q2 Q3 Q4 Q1 Q2 H1 Like-for-like sales (excl. fuel) 1.6% (1.4%) (4.5%) (5.6%) (4.0%) 3.7% (0.8%) Like-for-like sales (incl. fuel) 8.4% 3.0% 0.6% 2.7% 2.9% 7.7
Slide 52: Unique breadth of online grocery options for customers
Progress against priorities Financials Strategic highlights Appendix Unique breadth of online grocery options for customers GOL GOL Chop Chop Deliveroo / Delivery Click & Collect Uber Eats Stores 265 316 85 608 Cities & towns 99% UK population 99% UK population 30 185 Average basket size £95-£100 £8
Slide 53: Argos transformation: lower cost to serve by £105m
Progress against priorities Financials Strategic highlights Appendix Argos transformation: lower cost to serve by £105m Standalone Argos stores Collection Local stores in Sainsbury’s points fulfilment centres 570 430 450 c.425 c.425 to to 4601 5001 306 c.30 c.280 281 c.1601 11 FY FY FY FY FY FY FY F
Slide 54: Financial Services
Progress against priorities Financials Strategic highlights Appendix Financial Services H1 H1 Financial Services UPBT Group contribution basis 2022/23 2021/22 Change £m, Group Contribution Total income 1 £232m £187m 24% Underlying operating profit £30m £31m (3)% 12 11 AFS (recognised by Argos) Custo
Slide 55: Financial Services: performance drivers and coverage
Progress against priorities Financials Strategic highlights Appendix Financial Services: performance drivers and coverage Unsecured Credit Total Capital Ratio 1 Savings blended rate 2 Provision Coverage % Post dividend payment % % 6.6 20.1 1.3 6.0 17.8 16.7 17.3 5.0 5.2 0.7 0.6 0.3 H1 H1 H1 H1 H1 H1
Slide 56: Sainsbury's sales area and store numbers
Progress against priorities Financials Strategic highlights Appendix Sainsbury’s sales area and store numbers As at 17 September 2022 Supermarkets Convenience Total Area Area Area (‘000 sq ft) Number (‘000 sq ft) Number (‘000 sq ft) Number Opening figures 22/23 20,803 598 Opening figures 22/23 1,918
Slide 57: Sainsbury's store estate
Progress against priorities Financials Strategic highlights Appendix Sainsbury’s store estate As at 17 September 2022 Number of stores Argos and Habitat store numbers Sq ft Under 10,000 to 20,001 to 40,001 to Over As at New Disposals/ As at sales area 10,000 20,000 40,000 60,000 60,000 Total 5 March
Slide 58: Sainsbury's store openings and closures
Progress against priorities Financials Strategic highlights Appendix Sainsbury’s store openings and closures H1 2022/23 Supermarket Convenience Closures New stores Closures Slough Q1 Woolston Manchester Road Q1 Barnet Q2 Hampstead High Street Q1 Gallowgate Q2 Middleton St George Q2 Carshalton Green
Slide 59: Retail margin
Progress against priorities Financials Strategic highlights Appendix Retail margin As of 17 September 2022 Grocery sales performance by channel HY HY HY HY £m 2022/23 2021/22 Change 2022/23 2021/22 Retail sales (inc VAT, inc fuel) 18,084 17,315 4.4% Total Sales fulfilled by Supermarket stores (0.5)%
Slide 60: Financial metrics
Progress against priorities Financials Strategic highlights Appendix Financial metrics HY HY 2022/23 2021/22 Return on capital employed 1 7.7% 6.3% Net debt to EBITDA2 2.9x 3.3x Fixed charge cover 3 2.7x 2.3x Underlying tax rate 23.5% 26.4% 1 ROCE: Return is defined as 52 week rolling underlying pro
Slide 61: Plc Board
Progress against priorities Financials Strategic highlights Appendix Plc Board Martin Scicluna Simon Roberts Kevin O’Byrne Jo Bertram Brian Cassin Chairman Chief Executive Chief Financial Officer Non-Executive Director Senior Independent Director Jo Harlow Adrian Hennah Tanuj Kapilashrami Keith Weed
Slide 62: Plc Board
Progress against priorities Financials Strategic highlights Appendix Plc Board Martin Scicluna Simon Roberts Kevin O’Byrne Chairman Chief Executive Officer Chief Financial Officer Date of Appointment: Date of Appointment: Date of Appointment: March 2019 (joined the Board November 2018) June 2020 (jo
Slide 63: Plc Board
Progress against priorities Financials Strategic highlights Appendix Plc Board Jo Bertram Brian Cassin Jo Harlow Non-Executive Director Senior Independent Director Non-Executive Director Date of Appointment: Date of Appointment: Date of Appointment: July 2022 Joined the Board April 2016. Senior Inde
Slide 64: Plc Board
Progress against priorities Financials Strategic highlights Appendix Plc Board Adrian Hennah Tanuj Kapilashrami Keith Weed CBE Non-Executive Director Non-Executive Director Non-Executive Director Date of Appointment: Date of Appointment: Date of Appointment: April 2021 July 2020 July 2020 Skills and
Slide 65: Operating Board
Progress against priorities Financials Strategic highlights Appendix Operating Board Simon Roberts Kevin O’Byrne Rhian Bartlett Graham Biggart Jim Brown Chief Executive Officer Chief Financial Officer Food Commercial Director Chief Transformation Officer Chief Executive Officer, Sainsbury’s Bank Tim
Slide 66: Operating Board
Progress against priorities Financials Strategic highlights Appendix Operating Board Simon Roberts Rhian Bartlett Graham Biggart Jim Brown Chief Executive Officer Food Commercial Director Chief Transformation Officer Chief Executive Officer, Sainsbury’s Bank See Appendix 13 Date of Appointment: Date
Slide 67: Operating Board
Progress against priorities Financials Strategic highlights Appendix Operating Board Tim Fallowfield OBE Mark Given Phil Jordan Company Secretary and Corporate Services Director Chief Marketing Officer Chief Information Officer Date of Appointment: Date of Appointment: Date of Appointment: September
Slide 68: Operating Board
Progress against priorities Financials Strategic highlights Appendix Operating Board Clodagh Moriarty Paula Nickolds Angie Risley Retail and Digital Director General Merchandise & Group HR Director Clothing Commercial Director Date of Appointment: Date of Appointment: Date of Appointment: June 2020
Slide 69: Supplementary financial details
Progress against priorities Financials Strategic highlights Appendix Supplementary financial details 1. Weighted average number of shares 2. Dividend 3. Financial calendar HY 2022/23: 2,314.3m (and 2,350.2m diluted) 2022/23 2021/22 Q3 trading statement 11 January 2023 HY 2021/22: 2,245.4m (and 2,349