Hello, and welcome to the Sainsbury's 2024/2025 Q1 Trading Statement Analyst Q&A Call. On the call this morning is Simon Roberts, Chief Executive; and Blathnaid Bergin, Chief Financial Officer. I will now hand you over to Simon Roberts for opening remarks.

Thank you. Well, good morning, everybody, and thanks for joining Blathnaid and I to cover our first quarter trading statement covering the 16 weeks up until the 22nd of June. I'm going to highlight some key points about our trading performance in the quarter. And then, of course, Blathnaid and I will be really happy to take all your questions. So as you know, this is the first quarter of our next level Sainsbury strategy that we shared with you back in February. And we've set ourselves up really well to build on the progress that we've made over the last three years. I'm pleased with this first quarter against a particularly strong period last year, which benefited from peak inflation from the launch of Nectar Prices and a good early start to the summer. Against this, our strong momentum in grocery has continued with the second year of volume growth. We've now made gains from competitors every month for 15 months. And more specifically in this quarter, we've gained more market share than anyone else in the period with strong switching gains from across the whole of the market. And it's worth reminding you, too, that these gains haven't yet seen any of the real benefit from the work we'll be doing to allocate more space to our highest opportunity stores in food. This program will begin to deliver significant benefits through next financial year. So we are continuing to see customers consolidate their grocery spending as people return to normal patterns of working in offices, they're shopping around less. Customers have always recognized Sainsbury's for great quality and service and because they're now trusting us more and more on value, we're gaining more share than anyone else when customers are looking for a one-stop shop to meet all of their needs. Our consistent focus on great quality, value and service has never been more important, and we've been making gains at both ends of the market. We've improved our value perception ahead of the market, while at the same time, continuing to outperform all competitors in premium own label volume growth as customers choose Taste the Difference when they want to treat themselves, friends and family at home. We've launched 400 new products this quarter with the summer additions range that we're partially excited about, especially now that we're starting to see similar sunshine. Taste the Difference sales grew 14% in the quarter, and it remains our fastest-growing own brand. During the period, we annualized the launch of Nectar Prices that went live in April 2023 and was then rapidly rolled out across the summer to reach over 6,000 offers. We now have almost 18 million digital Nectar collectors, and they're responding really positively to the great value and rewards they can access through the scheme. We're also partnering with an increasing number of the UK's biggest brands to run innovative promotional events, and that's creating loyalty and value for customers as well as increasing value to us as Nectar gains more and more momentum. Suppliers are really supporting and partnering with us on these exciting initiatives and at the same time, they're benefiting from our leading Nectar 360 capabilities in terms of the insights and the return on advertising spend they're now able to access. Meanwhile, in General Merchandise, we have, as expected, faced a more challenging period with tough weather comparatives, particularly impacting the end of the quarter. Argos sales reflected the toughest comparatives we will face this year with an unseasonal start to summer impacting house, garden and outdoor furniture categories. You'll also remember that last year, we had the benefit to our consumer electronic sales from gaming as we had strong availability at the time of some new releases. Demand has been weaker this year in these categories, whilst we see customers continue to shop more cautiously across the General Merchandise market generally. Now against this backdrop, we continue to make good progress in transforming Argos, in line with the plans we set out in February. We are enhancing our digital offer with continued personalization of customers' experience online and improved attachment capabilities such that more than 90% of our products now have a suggested add-on. We are also further improving our ranges. And as we discussed earlier in the year, we're increasingly using stockless Supplier-Direct Fulfilment arrangements to enable our range expansion, particularly into popular premium brands. We are underway with our £200 million buyback program and last month announced that we additionally expect to return at least £250 million to shareholders once the sale of Sainsbury's Bank’s Core Banking Business to NatWest has been completed and the future model for Argos Financial Services is in place. So turning to guidance. We've had a later-than-expected start to the summer, but it's early in the year and there are softer Argos comparatives to come. So as we set out in April, we continue to expect full-year retail underlying operating profit of between £1,010 million and £1,060 million, which represents growth of between 5% and 10% versus last year. The business is in great shape, as you can see from the strong continuing momentum of our grocery performance relative to the market. And we remain sharply focused across the whole business on delivering our next level commitments. So thank you for listening to that introduction and Blathnaid and I will now very happily take all your questions. Thank you.

Welcome to the Q&A section of this call. [Operator Instructions] Our first question is from Sreedhar Mahamkali at UBS. Please unmute yourself and begin with your question.

Good morning, Sreedhar.

Hi. Good morning, Simon and Blathnaid. Just a couple of questions, maybe, please. Just picking up on some of the points you made on GM. Are you able to talk to us a bit of a shape of trading when Summer eventually or at least started like it was coming back. Anything there just in terms of exit rates and stuff that we can keep in mind for July and August if the weather just turned. So that's the first one. Related point on inventory in non-food. Are you happy with where things are at the moment? And is there anything we should think about from a free cash flow perspective? And lastly, you've talked about space rotation, 180 supermarkets. Is there any help from that in the grocery numbers or any sort of hindrance to the GM numbers that we've seen today? Thank you. Those are the three. Thanks a lot.

Thanks, Sreedhar. I'll take the GM and space questions and maybe Blathnaid take inventory and how we're thinking about that. Thanks, Sreedhar. Look, I think as it's really clear, we've laid out today that this was the toughest comp for us this quarter actually because last year, in quarter one, the weather was clearly much more favorable, particularly in June, and we had a number of tailwinds at the time. Gaming was very strong in consumer electronics. So look, in terms of where we are at this point, we're very focused clearly on making sure we take advantage of the summer on the basis that at some point, it will come. And we plan for a normal summer, not an exceptional one. And as you say, July and August is ahead of us. I would just say let the consumer, there's a lot of pent-up demand to spend when the weather comes good. Obviously, we had a real shift in the weather last week, and we saw a major shift actually in how customers shop. Just to give you an example of that, we sold more cooling and fan products last week in one week than we've sold all of the year-to-date, for example, we saw sales really respond when the weather came good. So there's lots of focus on making sure we're ready for improved weather. But more broadly, I would say, look, the Argos business, the General Merchandise business, you heard our plans over in the year. We set out a clear plan to continue to improve our digital experience to give customers more reasons to shop with Argos and to make sure that our offer really meets customer demand, and we're well on with putting those plans in place. The team has mobilized at pace, and there's lots of good activity to make sure that we can drive that. On inventory, Blathnaid?

Great. So first of all, Sreedhar, as you know there's a great focus on working capital this year in business, and we continue to have that focus. We are ready for summer. We've got really good availability, and we're here to serve our customers when the sun shines and it's already started to shine, which is great. The other thing is we are really good at managing stock. And as we travel through the summer, if we feel there's a need to take sort of action or drive any activity, we'll do that so we get a clean exit. And it's something we've done before. So we're not particularly worried about it just at the moment.

Thanks, Blathnaid. And then Sreedhar, on your final question, yes, I think it's really important just coming back to the grocery performance in the quarter. As I said in the intro, we've delivered growth on growth in terms of volume performance. So we were first at the block to book volume on in the first quarter last year, we've put growth on top of that. And we're really actually really encouraged with the strength of our volume performance in grocery. We're saying too that weather held back GM. It held back food a bit actually in the first quarter given the strength of June last year. But absolutely, we're focused on continuing to outperform the market. And I would say, we've said to you before, we expect to outperform in volume terms by between 1% and 2%. Actually, this first quarter, we've exceeded that. And it just shows the strength of those big Trolley shops really powering the grocery volume performance. In terms of the space rotation, we're not really into that program yet. It's still relatively early. Plans are going well, but the volume performance you're seeing doesn't have that as an extra component driving it. So that's really to come. It's ahead of us. And so we remain very confident on the strength of our momentum in grocery, and that will continue to build, particularly into the back end of this year and into next year as that space rotation program picks up pace.

Thank you.

Our next question is from Izabel Dobreva, Morgan Stanley. Please unmute yourself and begin with your question.

Hello Izabel. Good morning.

Good morning. Three questions. So my first one is just on the guidance. I think on the call last quarter, you talked about the midpoint being consistent with the normalized summer. I was wondering, is it fair to say that maybe weather, a little bit worse than expectations, but then growth to be better. So we're still tracking in line with the midpoint? Would that be a fair summary? That was the first question. And then I have a few more.

Thanks, Izabel. Look, as you say, we set our guidance out in April at £1,010 million to £1,060 million. And look, really clear, we set that range because, look, it's still early in the year to be able to call where we're going to close a number of things, as you say, are within that, but we're absolutely clear on our guidance range. 16 weeks in, lots of the year still to come, and we're very well set. I think we've got strong momentum in grocery. As the lot of the Summer is still to come. And you can see the strength of how the business is performing, particularly in grocery. We said four things would underpin delivery this year, beating the market on volume. We're doing that. We're actually performing a bit ahead of what we thought. We said we deliver strong growth from Nectar over the three years. We're well on with that plan. We said we'd deliver a resilient Argos performance. That's what we're delivering. And we said, of course, we deliver operating cost savings to offset inflation. So we're in the place we expect to be, with let's plan for the Summer continuing to improve as we look ahead.

Thank you. And my other two questions were very quick. So on General Merch, could you give us a sense whether you saw any elevated discounting over the quarter in the seasonal categories. Was there elevated promotional pressure? And then my last question is just on the £250 million excess return from the sale of financial services. I think you've given the timeline to closing that transaction, but we don't have a time line for the Argos Solution part. So could you give us some color there so we can understand when you do the extra buyback?

Yes, sure. Why don't I finish the discussion on where we are in General Merchandise in the market and then Blathnaid can talk to your question on the next phase with the financial services plan. Look, I think to your question, there's been actually quite a bit of promotional activity in the market. I would say earlier in clothing this year, not a surprise. As we know General Merchandise categories are heavily influenced by the season, and extent to which customers buy early into both clothing and broader seasonal GM products. We've taken a disciplined approach. We've run activity where it's really worked for customers. You've seen in our quarter one results actually quite a marked improvement in our clothing momentum. Encouraging to see that. And actually, womenswear, particularly has really improved quarter-on-quarter. Our ranges have been a lot better, and they've really connected with customers and we've seen womenswear sales really respond. And we expect that picture to continue. Obviously, we're managing full price and promotional activity in the most disciplined way that we need to. And of course, as we look ahead, as I said already, as a lot of the Summer still to come. And I think it's important when customers do come out and shop then we've got availability of the products they want to buy, hence, the reason for our approach. Just to reiterate again, there's a lot of pent-up demand in the consumer for warm weather and seasonal products. We saw a real shift last week. And of course, we're ready for that on the basis that at some point, we'll see some summer. Thank you. Blathnaid?

Great. Good morning. Izabel, how are you? So very quickly on the bank. We are starting to work through the AFS solution now at the latest we'll update before the end of H1. So we are rather underway with that at the moment. The capital return will happen in the next financial year. And we are anticipating that will come in sort of late 2025, early 2026. It's about £250 million, and we will return that to shareholders. We haven't decided to form or the nature of that return at the moment, but we'll debate that once that dividend and it goes back up from the bank and we're ready to send that to shareholders.

Thank you.

Thanks for your questions, Izabel.

Our next question is from Monique Pollard at Citi. Please unmute yourself and begin with your question.

Good morning, Monique.

Good morning. Thanks for taking my questions. Just a few from me, please. The first was, obviously, you highlight Taste the Difference doing very well, up 14%. And you're seeing really strong growth in Premium Own Label. I was just wondering if you could give us any sense of the scale of that within your grocery sales. The second question was just on clothing. Obviously, you mentioned, Simon, the much better momentum. You're seeing that minus 3% versus minus 12% last quarter. particularly in womenswear. And obviously, last quarter, when we heard from you, you talked about the need to improve the ranging in particular, the availability. I just wondered if you felt you were kind of through a lot of those improvements in clothing or whether there's more that you're still working on to be rolled out? And then the final question was just whether you could give some indication in the quarter in terms of grocery of the volume versus price growth? Is it right to think about pricing having been about 1% to 2% after the Kantar data?

Great. Thank you. Okay, super clear. So Taste the Difference, where you started your question. Look, I mean, I think we are really encouraged with the performance of our Taste the Difference product range. We've really focused on this over the last couple of years because increasingly, of course, more and more customers, the big trend here wants to enjoy great food at home with friends and family. And that's why we're seeing customers really buy in to Taste the Difference. We launched 400 new products in total in the quarter, half of our new products are in Taste the Difference. That's a marked shift from where we would have been before. And what I think we're seeing here is just customers really wanting to buy into both the quality, but very importantly, compared to a number of competitors, the value of our premium products. And that's what's really driving the volume there. So we're really encouraged with the strength of it. There's a lot more to come. Now just I was with the team, the week before last looking at our Christmas ranges, and we are really focused on making sure we have this leading combination of value and quality in the market. That really is at the core of what's happening to Taste the Difference. And to your question, it is enabling, Taste the Difference to move up in its participation. It's the strongest growing of our own brands, and it's also becoming – as every quarter past is a stronger part of what we're doing. So great progress there, more to come, and we think it's really at the heart of what customers expect from Sainsbury's. On clothing, we are encouraged with the move on in terms of our performance. Ranging has definitely improved, particularly in womenswear, I would just say that within the overall clothing trend, womenswear was quite ahead of that. So womenswear got improved through better ranging, better availability. And we're very focused on making sure that continues. There's more to come. There's more we need to do to keep improving our clothing performance, but this has been a clear step in the right direction. I think more broadly, the important trend here is that customers are now coming back more and more to full choice supermarkets that can give them the combination of value and quality across the full range. And so as you've seen, we're seeing a big step up in customers coming to us for their weekly full Trolley shop – of course, when they're in the store doing that, they want to make sure they can access clothing and other products that we sell. And so that one-stop shop for everything that you need at great value and great quality, including clothing is important, and we're definitely taking steps towards making sure that we can deliver that more to come. And then on your question on the combination of what's happening on inflation, what's happening in terms of the kind of broader pricing dynamics in the market. I mean a couple of things to say here. I mean, absolutely clear now we're well over the peak of inflation and a much flatter inflation environment is where we're at. It's good for the consumer. It's good for businesses. So we can plan with more certainty as to the environment as we look further out. I think for sure, low single-digit inflation. Actually, you saw the Kantar numbers just recently 2.3%. We're inflating a little bit behind that. But also at the same time, there is a little bit of inflation starting to come back in, particularly into fresh food categories. We've obviously got wage costs in the system still to pass through. And so I think not a surprise we're starting to see a bit of a tick up in some of the fresh food categories. But overall, a more stable inflation environment, low single digits. We're a bit behind the inflation at the moment as we continue to offer great value, but some of that inflation is still to pass through. And then more broadly, what we're seeing is a continued, in very rational market on pricing. Everyone is facing the same kind of challenges and focuses. And therefore, in terms as we look ahead, we expect that rational market to continue alongside a more stable inflation outlook.

Great. Just to build on Taste the Difference, Simon, it's high single digits for our grocery sales, and we have probably a higher proportion of those premium sales and other groceries as well in the market.

Right. Thanks, Blathnaid.

Excellent. Thank you both. Thank you.

[Operator Instructions] Our next question is from François Digard at Kepler. Please unmute yourself and begin with your question.

Good morning, François. François Digard: Good morning. Hello. Thank you for taking my question. Could you come back on your sentiment on the markets on the underlying market volumes? I understand that you beat the market on gaining shares, but how do you see the demand evolving in the future? Can we see the success of Taste the Difference as an evidence of uptrading? And is that uptrading part of your market share gain today or in your future plan? Thank you.

Thank you, François. Well, I think, look, to your point, one of the key features of our results in the first quarter is that we delivered volume growth on top of volume growth last year. So as I said in the introduction, for 15 months consistently now, we've been seeing the strength of our food business build both as we grow volume, but also as we win more big Trolley shops back into Sainsbury's as customers are more and more confident with the combination of our value and quality. And so I think what are we seeing in the consumer to your question at the moment. Of course, everyone is still very focused on the cost of that weekly shopping, that's why value is so important. That's why we've been laser-focused on this. And that's going to continue. Of course, it is. But at the same time, customers are looking for, as you say, products to trade up into. We're seeing a higher participation in Taste the Difference as Blathnaid has just described, 14% growth in TTD and that's powered by both this trend more and more for customers to want to buy into products to celebrate with friends and family at home, but also the strength of our offer has really grown in terms of the innovation that we have. So as we look ahead, we'd expect to continue to grow ahead of the market, 1% to 2% ahead of the market is our guidance over our three years. As I said in the first quarter, we beat that, and that's before we've started to move more space back into food. So the momentum is very strong in the underlying performance here. And look, our focus is very much on driving volume growth out of the market, continuing to leverage that volume over our fixed cost base. So we drive our profitability as we improve – continue to improve our volume performance. And that, as a team, is what we're really focused on. Customers have got more and more confidence in the Sainsbury's food offer, that's continuing to build. And we've got a lot more to deliver as we look ahead over the rest of this year and into next to make sure that this momentum takes advantage of that demand in the market. François Digard: Thank you. And if I may, just I'm not sure to have understood you properly, but you said that your inflation rate was above or below the market as reported by Kantar?

Yes. And I'll just repeat that, thanks François. So it's slightly below. When you look at the Kantar numbers last week, I think 2.3%. We're just inflating slightly below that. And as I said, low single-digit inflation is our expectation as we look ahead. And just to remind you, again, within the combination of our performance in the quarter, obviously, much lower inflation this quarter one compared to last, but volume growth in quarter one last year and in quarter one this year, substantially more volume growth as we've stepped up. François Digard: Okay. Very clear. Thank you.

Thank you.

Our final question will be Anna Schumacher, Exane. Please unmute yourself and begin with your question.

Hello, Anna. Good morning.

Hi. Good morning everyone. So I have just a quick one and it's back on grocery volumes. Most of the questions have been answered. So it sounds like the like-for-like volume growth is running at between 3% to 4% historically. Have you like outside of COVID, have you ever seen it, at this high?

Thanks, Anna. Look, I think your kind of pitch on the volume performance is a good basis to think about where our volume performance is at. We're performing as you can see, well ahead of the market, that combination of value, quality, availability really powering through with the customer. And as I've said, both in our strategic update in February, our prelims and now today, as a team, we are very focused on delivering for customers in grocery, that combination of value and quality, and it's really working. We're winning from both ends of the market. More customers are coming back to Sainsbury's for their big Trolley shop. And one of the things that if more and more we're seeing now is that people got a bit less time on their hands, perhaps back in the office, another day or week, and so the convenience is going to a big store where you can trust the value, you can get the quality, you can get the availability, you get the service that you expect. It means that customers are shopping around less spaces. They're coming back into full choice supermarkets and that's one of the reasons why we're seeing this shift. And as I say, winning from both ends of the market, which is powering the volume growth that you described.

That's great. Thank you.

Thanks very much.

Next question is from Paul Rossington, HSBC. Please unmute yourself and begin with your question.

Hello, Paul.

Good morning. Hi everyone. Two super quick ones, really. Just in the Argos number, I just want to double check that there isn't maybe a disproportionately high number of store closures or anything else in that number. That's a genuine number impacted by the comp base? And then the second one is on the stores where you're going to rejig the space this year. How many is the 180 do you expect to have done by the end of this year? Thank you.

Thanks, Paul. Well, look, just to your first question, there's a couple of important things in the Argos numbers, which I'm pretty sure you've got, but just to reiterate them, obviously, we come off this quarter ahead of the anniversary of the exit of Argos in the Republic of Ireland. That's one of the things that washes through the numbers in the next quarter. Obviously, we continue to work on the Argos transformation. So there is some store change in the numbers. But I think the main underpin of the Argos performance in the quarter was the strength last year of the first quarter. In total sales, we did sales growth of 5% last year in Q1, powered by a combination of strong consumer electronics sales, particularly gaming, the strength of the weather in the first quarter, you'll remember how strong June was last year. So the underlying strength last year against clearly this year, still a very cautious customer in General Merchandise. I mean, high-ticket discretionary items and the customers aren't yet really buying into those categories. And I think we need to see some sequential interest rate cuts, hopefully, in the autumn, that will give more confidence into those categories. Now for sure, the consumer wants to spend, particularly when the weather improves, but we need to see some of the underlying fundamentals continue to come through to help that. So that's where we are on the Argos piece. On the store rotation or the space moves, I should say. Look, I think a key part of what we laid out in February, as you'll remember, was our more for more plan within becoming first choice for food. And what we've committed to do is in about 180 stores, we're going to move space from General Merchandise into Food. That's because as we're driving more and more volume through out the food business, particularly in fresh foods, we need to increase the space that we have available, so we can really serve customers both with the breadth and the depth of availability. And broadly, that program delivers 1/3, 1/3, 1/3. For obvious reasons, we're well on with the planning now. We're landing some of the early schemes, some of the recent schemes we’ve landed really delivering already. But the momentum of that program really does pick up more into next year and beyond. So the volume performance we're seeing now is without the benefit of that coming through, yes.

Thank you.

Thanks, Paul.

Our final question is from Darren Shirley at Shore Capital. Please unmute yourself and begin with your question.

Hello, Darren. Good morning.

Yes. Good morning, all. Just one for me, quick one hopefully. You've been quite clear in terms of the inflation expectations being a sort of low single-digit for the year. When you look at sort of rate cost or what we've seen over the last month or so, do you see that as a risk factor to that number at all?

Darren, rate cost, as you say.

Rate costs.

Okay. Thank you. Got you. Look, I think – I mean, a couple of things on this and Blathnaid might want to comment on this as well. Look, I think as you can see, in terms of the inflation overall picture, we've mainly focused on grocery in this discussion. And as I said, low single-digit inflation, some labor costs still to work its way through, and that's why we're seeing a little bit of an uptick in some of fresh food categories. On General Merchandise, look, I think it would be fair to say, I wouldn't have – we've had a lot of experience over the last four to five years on managing the cost of moving products across the world.

So we're not seeing this as a headwind at the moment. We tend to enter in to long-term contracts on that. We have consistency of delivery and good relationships there. So we're not flagging anything at the moment. We want to watch, I think, particularly where you look where the spot rates are, but it's not something that's impacting us today.

Thanks, Darren. I think that – I mean the key point – the key point here, I think, is all about planning over the rest of the year, obviously, mitigating an impact on the cost of freight as far as we can. But actually, the key point is making sure we get a lot of products into the system in advance of the third quarter. So and our teams are working really hard on this to make sure we've got good availability. We're containing the impact of benefit of rate on cost but make sure we've got products installed, ready for really important second half of the year. Okay, are there any more questions?

Thank you.

That was our final question. I'll now hand back to Simon Roberts for closing remarks.

Okay. Well, thanks everyone for joining us this morning. And [of course], it's a busy week, a lot happening this week. So really good to update you on our Q1. Look forward to catching up through the coming few weeks. And see you soon. Thanks for your time.