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£635M £32,412M £220M £222M 04 Strategic Report J Sainsbury plc Annual Report 2019 2018/19 highlights £635m £32,412m Underlying profit before tax Group sales (inc VAT) & £220m £222m Q A Cost savings Reduction in net debt As we celebrate our 150th anniversary, Group Chief Executive Officer Mike Coupe When we opened our doors on Drury Lane looks back on the year. in 1869, Mary Ann and John James Sainsbury promised customers ‘quality perfect, prices lower’. I’m proud to say that our focus on giving customers high quality food at good value remains as true today as it was 150 years ago. We have been delivering on our strategy for the past four and a half years and the last year in particular has been a big year of change for the business. Shopping habits continue to evolve and we are therefore updating our strategic priorities. We have set the business up for the long term and have a clear plan for the year ahead.” Mike Coupe Group Chief Executive Officer Strategic Report J Sainsbury plc Annual Report 2019 05 How would you sum up the Are you pleased with the With our experienced management team Strategic Report last year? Group’s performance? and talented colleagues, we are well placed We are committed to helping customers I am pleased that we have increased to maximise the opportunities for growth live well for less, so I was disappointed by underlying profits, reduced net debt and and create value for our stakeholders. As we the Competition and Markets Authority’s increased the dividend. In the context of a look to the next 150 years, our success will be decision on our proposed merger with Asda, very competitive retail market, though Group rooted in knowing what our customers want which would have enabled us to reduce the like-for-like sales decreased by 0.2 per cent, and we will continue to strive to ensure that cost of living for millions of households we continued to deliver on our strategy, our colleagues reflect the great diversity of through £1 billion of lower prices. growing underlying profit before tax to £635 the communities we serve. We must also million, driven by a solid food performance keep pace with our customers’ changing I remain confident in our strategy as a and the Argos synergies we have delivered lives, so that shopping with us remains easy standalone business. We know what we ahead of schedule. and convenient and new technology will need to do to respond to changing customer play an important role in this. shopping habits and an increasing focus Food remains at the heart of our business. Governance Report on value. Our strength and growth in premium, What is the Group’s focus value-added ranges help us to invest in for the year ahead? We have achieved a lot this year and we making our commodity ranges better value. We have been delivering on our strategy for know there is more to do. Some of the key In this highly competitive area, we know we the past four and a half years and the last year achievements include completing the largest have more to do to grow sales. Following the in particular has been a big year of change for reorganisation in Sainsbury’s stores for more important structural changes we made in the business. Shopping habits continue to than a decade. This transformed the way Sainsbury’s stores last year, we have made evolve and we are therefore updating our we work by creating a more efficient and significant improvements to store standards strategic priorities for the year ahead. effective management structure. A single fair in recent months, which remain a focus. Our and consistent contract for all Sainsbury’s Convenience and Groceries Online channels Customers rate us first for food quality, store colleagues gives us greater flexibility remain strong drivers of growth, with sales but we know there is more to do to make to ensure colleagues are always in the right increases of 3.7 per cent and 6.9 per cent our commodity products better value for place for our customers. In recognition of this, respectively. customers and grow sales in those categories. we increased base rates of pay to an industry- We have completed the Sainsbury’s store Financial Statements leading £9.20 per hour, taking Sainsbury’s General Merchandise and Clothing transformation and made significant store colleagues’ total pay increase over the delivered a solid performance, with Argos improvements to store standards in recent past four years to 30 per cent. outperforming a highly competitive and months and this will continue to be a focus this year, using our new customer feedback We completed the integration of Argos, promotional market. Having reduced the service, Lettuce Know, to inform store delivering synergies of £160 million nine number of promotional events, our Tu clothing managers on how customers feel about months ahead of our original schedule. range outperformed a challenging market and shopping in their specific store in real time. We have 281 Argos stores in Sainsbury’s increased full price sales. We are investing significantly in our store supermarkets, as we make better use of the Our focus on increasing efficiencies delivered estate this year – we trialled enhanced space in our stores to enable customers to do overall cost savings of £220 million. We have beauty ranges, wellness aisles and new more of their shopping easily and conveniently reduced net debt by £222 million to £1,636 concession partnerships last year and will under one roof. million and we are targeting a further be rolling these out to more stores this year. We continue to adapt to changing customer reduction in net debt of at least £600 million In total, we will invest in over 400 supermarkets shopping habits. Our digital capability in the next three years. We have strong cash this year. is increasingly important, both to support generation with retail free cash flow of £461 We have completed the Argos integration, colleagues and improve the shopping million. In line with our affordable dividend delivering the £160 million of synergies and experience for our customers. Argos is a policy, this year’s final dividend is 7.9 pence there is more we can do this year to continue technology-led retailer and sales generated per share, bringing the full-year dividend to to bring the businesses closer together to through mobile devices passed £2 billion this 11.0 pence per share, an increase of drive efficiencies and also to improve the year. SmartShop is now available in over 100 7.8 per cent compared to last year. customer experience. supermarkets, allowing customers to scan their shopping using a hand-held device or How are you celebrating your £4.7 billion of our revenue now comes from their mobile phone. We were the first grocer 150th anniversary and what will our online businesses and we are increasing in the UK to introduce SmartShop Mobile the next 150 years look like? investment in technology to make shopping Pay, enabling customers in eight of our When we opened our doors on Drury Lane across Sainsbury’s, Argos and Sainsbury’s convenience stores to pay on their in 1869, Mary Ann and John James Sainsbury Bank as quick and convenient as possible smartphone from anywhere in the store, promised customers “quality perfect, prices and to make the business more efficient. saving them time and helping them manage lower”. I’m proud to say that our focus on We will also continue to strengthen our their budgets. As we develop our Nectar giving customers high quality food at good balance sheet and are making a new offer, we are trialling a new digital value remains as true today as it was 150 commitment to reduce net debt by at least proposition in Wales which gives customers years ago. greater choice over their rewards managed £600 million over the next three years. conveniently via their mobile phones. In that time, we’ve remained true to our We have set the business up for the long term values, which continue to be integral to the and have a clear plan for the year ahead. We are committed to paying above the way we do business and allow us to drive National Living Wage, rewarding great work lasting, positive change in the communities with great pay. We increased the hourly rate we serve. So, one way we are marking our of pay for the majority of Argos colleagues anniversary is by giving all of our colleagues from £8 to £8.50 from April, bringing the chance to volunteer for one day with the total increase to 18 per cent since a local charity or community initiative. Mike Coupe we acquired Argos in September 2016. Group Chief Executive Officer.
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