Sainsbury’s Sales Rise Over Christmas, Lifts Retail Free Cash Flow Guidance

Sainsbury's (LON: SBRY) has reported a robust third-quarter trading statement, fueled by significant Christmas market share gains. The strong performance prompts an upward revision of the company's Retail free cash flow guidance.

Grocery sales led the charge, increasing by 5.4% in Q3 and 5.1% during the crucial six-week Christmas period. Total retail sales (excluding fuel) grew by 3.9% in Q3 and 3.3% over Christmas. Like-for-like sales (excluding fuel) increased by 3.4%.

The company now anticipates delivering Retail underlying operating profit exceeding £1 billion. Retail free cash flow is now expected to surpass £550 million, up from the previous guidance of over £500 million, reflecting strong working capital performance.

Sainsbury's plans to return over £800 million to shareholders this financial year through ordinary dividends, a £250 million special dividend, and a £250 million share buyback.

Sainsbury’s combination of value, quality, service and availability drove the increase in sales, as customers switched from other retailers. Fresh food sales grew by 8%, with the Taste the Difference range leading the way. The company's value proposition, combining Aldi Price Match, Nectar Prices, and personalized Your Nectar Prices, resonated strongly with customers.

Driver Breakdown:

• Value Proposition: Aldi Price Match and Nectar Prices drove customer loyalty.
• Fresh Food Innovation: Taste the Difference range saw significant growth.
• Online Growth: Groceries Online sales increased 14%.

Argos experienced a more challenging quarter, with sales down 1.0% in Q3 and 2.2% during Christmas. This decline reflects weaker general merchandise market conditions and subdued spending on higher-ticket items. However, the Argos transformation plan continues to make progress, with sales of Supplier Direct Fulfilled products up 24% and Argos App unique visitor numbers up 33% year on year.

CEO Simon Roberts stated, “We have won grocery market share for the sixth consecutive Christmas period, again delivering our winning combination of value, quality, service and availability for customers,” reinforcing the company’s focus on customer satisfaction and competitive pricing.

Sainsbury's is also focused on cost savings, targeting £1 billion by March 2027. Capital investments in technology and infrastructure are expected to drive further efficiency gains.