J Sainsbury (LON:SBRY) used its third-quarter trading statement call to highlight what Chief Executive Simon Roberts described as the retailer’s “strong Quarter Three performance” across grocery formats over the 16 weeks to January 3, citing record convenience sales, 14% online grocery growth, and what he called the company’s best Christmas execution in nine years.
Trading performance and channel trends
Roberts said performance was “strong across all our grocery formats,” with record sales in convenience stores and online sales growth of 14%, including “a very strong increase in on-demand sales.” He added that the group delivered its “best ever fresh food availability” in the key Christmas week and “the really big days right across the store network,” and exited the peak period with a “clean stock outturn” featuring “very limited waste and next to no markdown.”
Category performance: fresh food strength, general merchandise pressure
Management emphasized fresh food as a major driver of the quarter. Roberts said fresh food sales grew 8%, supported by strong availability, with fruit and veg sales up 6%, meat, fish, and poultry up 9%, and dairy up 10%. He added that the retailer sold 20% more turkeys year over year and said “every single one of them was British.”
The company also highlighted premium own-label momentum, with Taste the Difference fresh food sales up 15% year over year. Roberts said the business grew premium own-label sales and market share “faster than anyone in the market.” Later in the call, he said Taste the Difference would exceed GBP 2 billion of sales this year and noted that Christmas included 260 new products, which he said were well received by customers.
Outside food, the tone was more cautious. Roberts said clothing sales were broadly in line with last year and gained share in a “weak, seasonally driven market,” while general merchandise sales declined year on year. He attributed general merchandise weakness to factors including reduced space allocation, subdued spending on bigger ticket items such as furniture, heavy promotional activity, and a weak gaming market. Gross sales declined 1%, with volume growth offset by lower average selling prices across the market.
Guidance: profit reiterated, free cash flow upgraded
Roberts said the company was able to reiterate its profit guidance “despite a weaker general merchandise backdrop,” while upgrading free cash flow guidance due to “strong working capital progress.” Management said it continued to expect to return more than GBP 800 million of cash to shareholders this financial year.
Pressed by analysts on profit dynamics, Roberts said grocery trading since the company’s November guidance update had been “very much in line with our expectations,” while general merchandise was “a bit softer.” He said the company did not compromise grocery to compensate for weaker consumer sentiment in general merchandise. With roughly seven to eight weeks left in the year at the time of the call, Roberts said the company expected profits to be more than GBP 1 billion, but “probably to be slightly lower than last year’s outturn,” citing balanced investment decisions and a tough backdrop that included “significantly unexpected costs, both from NI and regulatory costs.”
Chief Financial Officer Bláthnaid Bergin said the group “called up the cash guidance today to at least GBP 550 million,” and described working capital improvement as stemming from multi-year efforts across inventory and payment terms. She compared managing working capital to “landing a jumbo jet on the head of a pin as you come into year-end.”
Nectar Prices, personalized value, and pricing strategy
A recurring theme was value delivery through Nectar Prices and Aldi Price Match. Roberts said Nectar Prices was paired with price match, and during the peak period the personalized “Your Nectar Prices” offer became available to all supermarket customers for the first time. He repeatedly described personalized pricing as increasingly important, noting at one point that at least 25% of the company’s total value investment was now going into personalized value.
Management offered several metrics to illustrate customer engagement with Nectar:
- Participation: Roberts said the company saw its “highest participation of Nectar Prices” over Christmas.
- Assortment: He said the number of SKUs linked to Nectar Prices was “north of 10,000,” about a third of the assortment.
- Customer savings: Roberts said the average Christmas shop saved about GBP 27 using Nectar, and over the course of the year customers were saving around GBP 450 as a result of using Nectar.
Asked about relative pricing, Roberts emphasized that pricing is “incredibly dynamic week to week,” but said the company focused on balancing inflation impacts while maintaining customer value, highlighting big-basket growth and consistent volume gains. He also said the company “built a plan” for Christmas and “stuck to it,” arguing that others in the market appeared to adapt their plans closer to the holiday period.
Argos and space reallocation
On Argos, Bergin said the company remained focused on transformation and reiterated guidance for flat profit year on year, stating, “We are not chasing profit in Argos.” She cited app visits up 33% and more than 20,000 new supplier-direct-fulfilled SKUs coming online, and said Argos exited the period with a clean stock position. Roberts added that limited markdowns and clearance activity across the quarter were helpful and reflected tight stock control.
Management also discussed store space changes. Roberts said the group reallocated space away from general merchandise toward food in around 70 supermarkets this year, with most changes occurring over the summer so the stores were “online over this Christmas.” He said the business could see benefits in customer satisfaction and the ability to buy a wider range of food products. Roberts also said the company had begun its biggest new store opening program in a decade across supermarket and convenience locations, and noted that the impact from new space would build into next year as stores move from partial-year to full-year contributions. He said the reduction in general merchandise space had an estimated downside impact of about 150 basis points.
Looking ahead, Roberts said the company believed it was “past the inflation peak,” with commodities more stable and an environment he described as “much easier to predict” than the one faced this year. He also said consumers remained “very resilient” in grocery but were making clear trade-up and trade-down choices within the basket—dynamics management said were supported by both Taste the Difference premium growth and value initiatives such as price match and Nectar.
About J Sainsbury (LON:SBRY)
J Sainsbury plc is one of the UK’s leading food, general merchandise and clothing retailers.
Offering delicious, great quality food at competitive prices has been at the heart of what we do since we opened our first store in 1869. Today, inspiring and delighting our customers with tasty food remains our priority. Our purpose is that driven by our passion for food, together we serve and help every customer.
Our focus on great value food and convenient shopping, whether in-store or online is supported by our brands – Argos, Habitat, Tu, Nectar and Sainsbury’s Bank.
