J Sainsbury plc (SBRY) Earnings Call Transcript & Summary

Hello, and welcome to the Sainsbury's 2026/'27 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 over to Simon Roberts for the presentation.

Well, thank you, and a very good morning, everyone. Thank you for joining us this morning, and welcome to our First Quarter Trading Statement covering the 16 weeks, the 20th of June. I'm going to cover our trading performance upfront. And then Blathnaid and I will be happy, of course, to take your questions. But before we get into the results update, I just want to call out actually the immense job done by all of our colleagues, farmers, suppliers, refrigeration contractors, our entire team in last week's exceptional weather conditions, which came clearly in the first week of our second quarter. We had a strong sales week last week in both Sainsbury's and Argos but not without some operational challenges given the unprecedented temperatures across so much of the U.K. And it really was a phenomenal team effort with all of our team working around the clock to make sure we recovered as quickly as we could and into this week, of course, in preparation for another heat wave to come next week. So a big thank you to all of our team and all of our partners who support it. So you'll remember this slide from when we last spoke together in April, when I shared it with you then, I said that we were well placed to navigate the year ahead and that we're doing the right thing for our customers, colleagues, suppliers and farmers, we would continue to outperform the market and strengthen our business. Now 16 weeks in, we're doing exactly what we committed to do. We've made an encouraging start to the new financial year with continued volume growth and market outperformance. We know how tough it is for customers out there. The cost of living is still very much top of mind. And customers are looking for value now more than ever. And so it's been key to maintain a relentless focus on value giving customers reassurance that week in, week out, they can rely on Sainsbury's for their big weekly trolley shop. But we know that the customers being first choice for where they do their big shop is about more than just keeping our prices low. It's also about delivering outstanding quality, inspirational and exciting product innovation and being the supermarket customers trust for consistent availability, freshness and service. Now we've made big progress across all elements of our winning combination in the quarter. And the operational momentum we have in the business is driving continued strong execution where it matters most to our customers. And this is underpinned by the investments we're making in refreshing our stores by improving the digital experience with greater personalization, with the technology that's improving the shopping trip, AI and automation and driving efficiency in our operation and supported by the strength of our GBP 1 billion cost saving program. The strength of our customer offer is evident in our sales performance for the quarter, with grocery sales growth of 3.6%, reflecting slightly lower inflation quarter-on-quarter and continued volume growth against a particularly tough comparative period last year. Tu Clothing and Sainsbury's general merchandise sales were down year-on-year, reflecting very strong performance last year. Tu outperformed a soft market, and we continue to benefit from improved availability and improved style credentials. While General merchandise sales were impacted by some seasonal weakness, but more significantly, by our ongoing and planned program to tighten ranges and reduce space allocation in favor of food. And encouraging volume growth in Argos was offset by the impact of lower average selling price with sales marginally down by 0.5%. So looking here at the Nielsen IQEPOS [indiscernible] of market share in the quarter, which has been characterized by a number of headwinds, a more cautious consumer and a comparative impacted by cyber issues and seasonally less strong weather, we have continued to outperform the market. Our outperformance narrowed a little this quarter, but we fully expected this and we continue to expect to outperform the market by around 1% this year. What this really demonstrates is the continued strength of our customer offer across value, quality, availability and service, and how well we have executed our plan for customers. And this has been particularly true in the moments that really matter. The key events and occasions where customers are choosing Sainsbury's to celebrate. It is these moments that really played on our core brand strengths in fresh food, in innovation, in quality and in service. Now when the sun shown and demand was at its highest, we fully captured the benefit with outstanding fresh food availability and lots of summer newness across barbecue and sharing plates. As a result, alongside these key events, we outperformed the market during the May heat wave. As I've already said, we have had a positive start to the second quarter last week. We continue to remain tightly focused on giving customers the confidence that they can trust us a reliable value. And you can see here our price position at the end of this first quarter versus the end of the '25, '26 financial year. As a reminder, the value index we are showing you here is across the widest comparison we can make. Although worth noting it doesn't reflect the additional value we're offering to customers through personalized Nectar prices. The orange line is showing price parity. And as you can see, we have strengthened our value position versus most price competitive retailers. It is the consistency of our delivery on value that customers are really responding to with value perception improving year-on-year. We've maintained the biggest Aldi Price Match in the market for over a year now and customers continue to respond positively to the breadth of range available in both our supermarkets and our convenience stores. And more and more customers are benefiting from the great value of Nectar prices now and around 11,000 products and, of course, personalized your net prices. We now have almost 1 million more customers regularly using digital Nectar to access savings in Sainsbury's and across the full coalition. And as you know, this is the fuel that powers our Nectar 360 Retail Media business. So this increased participation is also helping us to further accelerate growth there. Now we delivered another strong performance in Taste difference this quarter with growth on growth against an outstanding quarter last year. Our passion for innovation remains a key point of difference. We've launched 380 new products this quarter, 50% of which Taste the Difference, expanding our delicious daily and picnic ranges as well as extending our restaurant quality discovery range to barbecue to make sure customers are well set for every occasion this summer. And our work in innovation is also supporting our strengthened 2030 health commitment, which we launched this quarter, and as you saw in the video at the beginning of the call. We know that customers are increasingly focused on making more conscious healthy food choices and so we are going further to make healthy everyday essentials, more accessible and affordable with a real focus on fiber, fruit and vegetables. We're launching a number of new and reformulated products and we've introduced full-on fiber labeling across more than 500 products, over 100 of which are included in Aldi Price Match or Nectar prices. Now so much of our progress here on leading innovation and our outstanding quality and freshness is only because of the strength of our long-term partnerships with farmers and suppliers. They are the driving thought behind our security of supply in Summer favorites such as delicious British berries. And this means we can deliver consistently great quality at great value for our customers. As we amplify our strengths in quality and extend our premium ranges, customers are noticing. This quarter, we've moved closer to the quality perception of our premium competitors, and with the brilliant work of our innovation team and our strong pipeline, particularly on discovery, we are confident we'll make further progress here. But what is equally good to say is that we're extending our lead on quality perception against the rest of the market as well because quality isn't just about taste the difference. It's about the standard of our products across the full basket our range and the strong availability and the freshness we maintain right across the shop, and it's that that's really resonating with our customers which is this combination. Our winning combination of value, quality, availability and service, which is driving our momentum and continued outperformance in the market. We continue to lead on customer satisfaction in supermarkets widening the gap again this quarter. And we've improved our service in groceries online as well. This really reflects the strong operational momentum we have in the business and the end-to-end focus we're now achieving, having brought together the leadership of our stores, supply chain and logistics. This is now delivering a step change in availability. And we've been really focused across the entire business this year on improving all aspects of the shopping trip for customers. We know that the amount of change we have been making to a number of stores has disrupted customers over the last 18 months. So we set out this year to ease some of the pinch points as we make changes, but also in helping customers recover faster after we make change. And the stats here across key customer perception scores show good progress in key areas, particularly availability. Now we talked in April about the fact we put in place a fully dedicated Argos management team.There is sharper focus and a new energy in the business. We've made good progress extending choice through more supplier direct fulfilled additions, improving the digital journey and driving higher app participation. And we've introduced AI-led stock forecasting and routing for the first time, already delivering significant benefits. We've also launched Argos Pay through our partnership with NewDay. More than 100,000 customers have opened accounts since the February launch, and we are underway with transitioning existing Argos credit customers across. As you can see from the chart on the right-hand side, we delivered another quarter of volume growth despite some significant drag in seasonal areas like garden furniture with a much lower colder and wetter start to the summer. We did have some benefit to sales of fans in the May heat wave week, but the main drivers of volume growth have been homeware and toys. Now as we've highlighted before, these are lower ticket categories. So alongside the continued pricing pressure in a very competitive market, this is driving average selling price dilution to sales growth. So in conclusion, it's been an encouraging start to the year. Against a lot of headwinds, we have continued to outperform the market, and we've grown volumes in grocery and at Argos. We've kept a super tight focus on value. We've executed well with a really strong operational performance, and we're continuing to accentuate our real points of difference across quality, range, availability and excellent service. And this is reflected in improvements in customer satisfaction and very strong colleague engagement. So we're confident we'll continue to outperform the grocery market. Our guidance, profit and cash is unchanged. I'm sure we'll have plenty of questions about that, and there's a good degree of caution still in there. This reflects the fact that consumer sentiment is not strong with a good deal of uncertainty on how things will shape up for them. And there was a lot of uncertainty still in terms of exactly how the impact of the conflict in the Middle East will impact the economy and consumers. Our guidance range gives us the capacity to make the right balanced choices to support our customers. The consistent momentum of our business has proved time and time again that it is right for us to do this, building a stronger business that delivers for all our stakeholders. So thank you for taking the time to listen. And with that, Blathnaid and I will now be very happy to take your questions. Thank you.

[Operator Instructions] The first question is from Manjari Dhar at RBC.

I'll begin with your question. I'll keep it to one since we were asked you. I was just wondering on Argos I guess, given the volume growth you've seen and the productivity improvements coming through, does that change your view on expectations for that business this year? And how should we maybe think about it heading into the coming years?

Why don't I take that? We're encouraged with the volume growth at Argos. But we're only 16 weeks into the year. We still have the summer and peak to play out. So our guidance at the moment is profits flat year-on-year, and let's see how the year plays out on that.

The next question is from Izabel Dobreva at Morgan Stanley.

I have, I guess, only one question. Could you comment a little bit on the competitive environment in each of your businesses? Because in grocery, Industry data suggests promotions have been stepping up for over 30 consecutive periods now. So how would you characterize the level of promotional activity in the grocery market? And what return you're getting on those promotions in terms of volume elasticities? Are you seeing any change in the competitive intensity there? And then also in general merchandise, you've noted that ASP is trending down. Is that the usual consumer weakness? Or are you seeing a step-up in competition in that segment as well?

Okay. Well, let me take grocery and then we'll talk on general merchandise. Look, I think maybe a couple of key themes are very clear. Look, I think the first thing is, as we've seen volumes in grocery have stepped back volume down in the industry over this period, volume a bit up for us. So I think it's very clear to see that the continued focus on very strong value offer is incredibly important. That's been the route which we've secured volume growth again in the quarter. The market look continues to behave very rationally as well to your question for all the obvious reasons. I think there's a really clear focus on providing customers with value for money. And that's meaning that whilst volume is down, promotional spends up a bit. I think the branded manufacturers are very keen to make sure, obviously, that volumes are protected as much as possible. Having Nectar prices is incredibly important for us as a platform because it means we can give customers both value in their shop, but also personalized value as well. And we work very closely with our suppliers to make sure that, that promotional investment goes in the best place to support volume but also give customers clearly what they want. So I don't think we're going to see any lessening of the focus on value over the balance of this year. Consumers are very concerned about the cost of living as you've seen in our statement today, value for money is absolutely the front of mind for customers. And so our job is to make sure we work closely with our suppliers. We have the right promotions in the areas that customers value most and that customers continue to feel, and they are a very strong level of trust in the value they can save week in, week out. And I think in terms of inflation that the question is where do we see inflation go from this point? That obviously has a bearing on volumes as we look ahead. Look, I think the reality is inflation actually stepped back a bit in the first quarter compared to quarter 4. There's definitely pressure in the system. I guess the question is, to what extent will we see inflation tick up over the months ahead. We certainly think by the mid-summer, we'll start to see some of the pressure building from the fresh food supply chains. But I think overall, encouraging to see a lot of the trade bodies adjusting down some of the estimates that they suggested early the year, and that all links back to what will clearly happen with volume. In general merchandise, a different situation given obviously a much more subdued customer. What we saw in Argos actually was volumes up in the quarter, which we were encouraged by. We had a strong plan for the quarter and the team did a really good job to make sure we were where customers were and we met customers with an offer that was going to work for them. Categories like toys and homeware saw a strong performance but higher ticket items are more challenging, particularly furniture, high-ticket item electricals despite a bit of a pickup on TVs into the World Cup. So I don't think we're going to see a change in the GM market. That's the reason why, as Blathnaid said earlier, we are very focused on driving the transformation for Argos, but we broadly see profits flat year-on-year, given promotional intensity in the market and given a more subdued consumer outlook.

The next question is from Rob Joyce at BNP Paribas.

I'm trying to understand now where we sit versus the full year sort of group guidance. If we continue at the levels you've seen in the first quarter, are we tracking towards the top end of the range of that guidance. And just within that, the pricing improvement versus U.S. of your peers, has that been driven by you? Or do you think the markets come towards you?

Thanks, Robert. Look, I think, I mean, maybe just a couple of points I would make just before getting into the full year. Look, I think we've seen an encouraging start to the year. We're pleased with our momentum. I think we've outperformed again, and we've taken some share and that's been despite some considerable headwinds. So I think that where we are as we look ahead is exactly what we said in April, which is we can see a clear route to growing retail operating profit year-on-year. We've shared with you already, we expect some additional profit flow from financial services around GBP 20 million. And so that leads us to a retail profit growth year-on-year with the GBP 20 million, somewhere around 1045, we can see a route [ Tu], which clearly is towards the upper end of our guidance. Now we've clearly got a range, and that's because there's still a lot of uncertainty out there, how consumers will behave, the situation in the Middle East. And so pleased with the momentum but too early at this point in the year to be able to predict how the second quarter and the rest of the year will play out, which is the reason why we've held our guidance where it is.

If you have time on the price of the relative pricing improvement now? I just guess what...

Yes. I mean, look, I think as you know, we've been incredibly focused on our value position. And what we've done in the quarter is stay very focused within the timelines of what we've set out to achieve, biggest price match in the markets, and Nectar prices on around 11,000 products. And what we've done there is continue to execute that plan with a strong focus on the center of the plate, which is enabling us to win the big basket. And it's working very well with customers. I made the point last time we talked that customers are really responding to the fact we've got a proven formula, and we continue to stick with it. And so customers, when they come to Sainsbury's know exactly what they get. We haven't chosen or specifically decided to move our price position relative to others. We've done what we set out to do, and that's what you can see in that pricing index. As a result of that, our position continues to be strong, and we continue to execute exactly what we've always committed to do. I make that point linked to your first question, whilst our ongoing commitment to grow retail operating profit year-on-year, we continue to be very strong value, but we expect to see profit up year-on-year and we're very focused, and we have a clear plan to deliver to that.

The next question is from Matt Clements at Barclays.

Just on retail media, a quick one. Have you seen a material step-up in activity into the World Cup? And if so, is that kind of optionality in your outlook? Or is that going to factored in?

So maybe on retail leader, Blathnaid, we can just give a bit of a sense of how we're feeling about our progress on the retail media and I can maybe come back a bit on from the World Cup behavior.

So look, we're really pleased with the progress in Retail Media. We committed at the start of this plan to deliver an incremental GBP 100 million profit. We're well on track with that. When we gave the guidance at the start of this year, we knew there was going to be a World Cup, so that was factored into that guidance and our thinking around what the opportunity there was for us.

Yes. And I think look, it's obviously a really significant opportunity with not only the World Cup, but a big summer of sports to make sure that our product offer is really meeting customers with what they expect, but also opportunities for more customers to buy into Nectar prices and Your Nectar prices. And what we've seen is, as I mentioned earlier to Izabel's question, you have a real opportunity to work with our suppliers and key partners to make sure that we bring the offers and promotions that are most attractive to customers at the moment. And that obviously is bringing more customers into the Nectar ecosystem and therefore, that -- the value of that is clearly one of the key drivers of what we then take into Nectar 360. So lots of really strong momentum there. And this summer, we'll continue to accelerate that.

The next question is from Will Woods at Bernstein.

The first question is just on the U.K. consumer. Obviously, you said that volumes were down in the quarter. The clothing market was a little bit softer. And obviously, your Taste the Difference sales have slowed down even though that's some pretty tough comps. Do you think you've seen any slowdown in the consumer through Q1? And do you think there's any kind of bifurcation in the consumer behavior?

Thanks, Will. Maybe just, I think a couple of key points in our statement today. Well, the first point to make is we grew volume and took share in the quarter. And I think that shows the strength of our offer relative to the wider market and how it continues to really deliver for customers. And actually, to your point, we saw clearly volume growth. But on Taste the Difference to your specific point, when you look at the level of growth year on year on year-on-year, we're delivering, would deliver something over 18% in the first quarter last year. And so we're delighted with our Taste the Difference performance. If you look at that alongside also the further improvements in quality perception to others just shows the strength of how that brand is coming through. So I think in the grocery business, clearly, volume stepped down a bit because the comps last year presented some tougher comps in places. But overall, we're pleased with the performance when you've taken around all of the headwinds of last year and the wider consumer situation. I think our General Merchandise and Clothing, a couple of things to say there. Look, I think on general merchandise, we have a very clear and planned program to take space from GM and invest that in food. And that's one of the things, as you know, we've set out to do over the last 2 years to next level. That's really working for us, and that's one of the reasons why the GM sales level step back a bit. But also, clearly, GM was held back a bit by seasonal year-on-year, very strong quarter 1 last year with the weather softer this year. So that pulled a bit of sales out of the GM performance. And the same on clothing. Actually, we took share on clothing in the quarter again. So the strength of the Tu performance compared to others came through. But obviously, the overall market in clothing was softer given the weather and given and some of the other factors. So net-net, when you stand back from this, actually, we're really encouraged with our relative performance to the market. And as we get our offers stronger and stronger and more and more customers do their big weekly shop with us, we continue to convert more customers into the brand.

The next question is from Sreedhar Mahamkali at UBS.

Quick one then. Just to go back to your point, Simon, on Argos transformation. You talked about a sharper focus on new energy under Graham's team you talked about a couple of efficiencies. Maybe you a bit more of a midterm question, not this quarter, not necessarily even this year. Does that give you a greater confidence in transformation in terms of cost and also the top line over the medium to long term?

Yes. Thanks. I mean, I think I'm sure between Blathnaid and I, there's actually some really important progress tying to build here. And I think the 3 big points that we said we would commit to improve our range assortment Argos is super important for customers. And we've added thousands more products on supply direct fulfillment. And obviously, we're building up our marketplace preparations for this year. On digital conversion and giving customers a much better journey in Argos as more customers come into the Argos app. And then specifically on your question, I think as we put a really dedicated focus on efficiency and costs, we're seeing more opportunities than we saw before to become more productive, right, Blathnaid?

Yes. And Simon mentioned in his script a little bit about some of what we're doing on availability and what we -- how we're using AI. That will help us drive a better customer proposition in the locations that our customer wants it want and really get the availability going in Argos as well. And then you add to that Argos Pay, which we launched earlier in the year, it's doing incredibly well, new customers coming in, a more modern offer, and it's really appealing to our customers, enabling the sale. So when I stand back and I look at what we've done on supplier direct fulfilled, what's about to land on marketplace, how we've augmented that with the financial services offer and the focus on the team on cost and efficiency, and the dedicated management team is really starting to come into its own. So really pleased.

From Xavier Le Mene at Bank of America.

So you delivered another quarter of -- we can see strong growth in market share gain, but can you just give me a sense of how much is structural? What is linked potentially to range availability, loyalty versus potentially price investment? And talking about price investment, do you think that or would you change potentially invest for whatever the cost savings you've got on the other side, is the competition was to get tougher? Or do you stick to the cost savings to invest in prices?

Okay. Well, let's take the kind of broad picture of what we've been doing on value and then specifically, what do we think has driven it in the quarter. Look, I think as you know, we've invested over the time of our Food First and Nectar Level plan around GBP 1.3 billion in food at value. And we made that investment much earlier in the plan. And we continue to see the benefits of that in customers trusting the value offer with the biggest price match in the market, as I say, and the strength of Nectar prices. I think what we're seeing in the quarter that we've just reported is the benefit of that ongoing consistency in our value. And then in addition to that, a real step-up in product availability, we've really been seeing fantastic response across the business in raising our ambition on availability. And we're seeing now the best availability that we've seen in a long period of time consistently. So that coming alongside the value position is giving customers more and more confidence. They can not only get the value they expect, but they can get everything they want each time they shop both in store and online. And then combined with that, the innovation and quality position that we talked about. The Sainsbury's brand has always been famous for its quality. And I think what we're seeing is as we get value and availability stronger, the strength of our quality position becomes even clearer to customers. And you saw in the charts how much we're gaining further advantage compared to the rest of the market and the premium retailers Tu. So I think it's a combination of all those things, which means that we're winning more of the weekly shop and that's the core underpin of our growth in volume again in the quarter. Obviously, a tougher market volume. Our volume also stepped back compared to where we were in the previous period, but growing year-on-year. And as I said in the opening comments, we continue to expect volume outperformance of around 1% for this year. That's what we planned for. That's what we're on track to deliver. And it shows our plan is very much focused on delivering for customers. But then to your second question, now it's very much about having the right balance between investment in value and delivering a growth in retail operating profit this year. And that's what we, as a team, are very focused on doing. We expect to grow operating profit year-on-year, whilst at the same time delivering customers the value they expect and trust from us.

The next question is from Clive Black at Shore Capital.

I'm in the middle of nowhere. So let me come on. In terms of food supply chain and your noise today, you're talking today around well-being, health and well-being. To what extent are they linked to what extent is this a new development for Sainsbury's? And what does it mean for shareholders?

Thanks, Clive. Look, I think a couple of key things here, maybe just to your question. The first thing you've heard us talk, I think, pretty consistently now about the importance of our long-term supplier partnerships, particularly in Fresh food. And I think what we've seen in this quarter is how critical they are continuing to be an underpinning our performance and what we can deliver for customers. And when I think about the breadth of those partnerships now across so many of our fresh food supply chains and the big step on availability that we've seen and those 2 things are clearly absolutely connected. We've had record weeks in a number of key categories that we just couldn't have got the surety of supply before. And that's now something consistently that we're doing in meat in poultry, in fruit and veg, these are really important foundations that we now have in place and a fantastic job actually done by so many of our farming partners in helping us deliver that. And then to your point on health, look, I think as you saw in the video upfront with our team there, we really want to demystify what it takes to make healthier choices and give customers real confidence that the accessible options on healthier choice are available for them at Sainsbury's at a price that's really affordable. And as you saw in the film, there are just so many opportunities for us to really lead on this. We think the Sainsbury's brand is expected to take this kind of position. Our customers are really looking for it. And we've had a really strong response already to full on fiber. Clearly, there's a direct link back to the partnerships with our farmers in being able to source the products that we need to be able to really deliver against healthier choices. And so this really is all about stronger fresh food supply chains a real focus on availability, giving customers what they want and then increasingly giving customers access to healthier choices that they can trust Sainsbury's to deliver.

The next question is from Benjamin Yokyong-Zoega at Deutsche Bank.

Just one on space reallocation and maybe one on food inflation if there's time. On space relocation, are you able to comment on the onto of the drag within general merchandise and clothing, or perhaps to ask another way, has there been any step-up in the pace of that space rebalancing? And then on food inflation, you mentioned that pressures in the fresh food supply chain may feed through over summer. Has this largely been a function of higher fuel, energy and freight costs with your long-term suppliers? And has there been any meaningful impact from spastic packaging costs to date.

Okay. Let's start on the GM question. I mean I think the key point here is we're delivering exactly the plan that we set out to do, which was -- in many of our supermarkets, we have very extended GM massive space with not good enough trading density. And so what the team have been working through here is how do we redeploy that space into food. That program has been a really important part of our Nectar Level plan. And space reduced in GM by a bit more than 3% year-on-year to give you a kind of sense of the quantum. Now there's still more stores to go through this program. We're taking real confidence from actually our ability to improve trading densities in the store, improve sales as we switch the space from game into food. It's a bit disruptive because it takes time, obviously, for the new layout of the store to bed down. But we've learned a lot over the last year about how to take some of that disruption time frame out. And so yes, roughly 3% of GM space moved into food in the year, more stores to be converted as we come through the rest of this year. and obviously, benefits to food as we convert the space. And then I think on the sort of impacts of inflation, as you described, look, I think it's super clear, as we all know, a big component of the cost of food is energy cost. And so as the cost of energy is being under more pressure, hence, the inflation pressures in the system. As we said at the start of the call, I think still a lot of noise on inflation. Inflation a bit lower in the first quarter than in the fourth quarter, but still a lot of pressure in the system. So we'll have to see where that comes through. But I think importantly, won't reach some of the higher levels of forecasted inflation perhaps that was suggested earlier in the year by some of the industry bodies. So I think the balance between inflation not lifting too much and keeping a strong or a stronger volume performance really clear to us all. And then in terms of the other issues you talked about plastic packaging, all of the components that are driven by the impact of the increase of oil are obviously on our mind. The work the team are doing is all about trying to make sure we contain inflation as much as possible and working closely with our suppliers to do that.

The next question is from Elizabeth Moore at Citi.

Just wondering on the Argos and GM performance. Obviously, you've got that headwind from space, but even assuming that, that was about 300 bps on GM. Why you think Argos sales outperformed General Merch so much? Just any color there would be really helpful.

I think we would say, as you know, we're well down the track of the focus on the Argos plan. And I think what came through in the quarter. It was clearly not a strong seasonal performance in quarter 1 compared to last year. Last year, the [indiscernible] for many more weeks than it did in quarter 1 this year. And so actually, the Argos performance was perhaps even more encouraging given the weather comp that we faced last year. As I said, we did particularly well in areas like toys and homeware which were good and really good value, good availability. So I think the team did a really good job in making sure we have good availability and good value where customers wanted to shop. I think the GM offer in the supermarkets was definitely, as we delivered our planned change in space, clearly, it was held back a bit by that. but also the seasonal impact. We have a big seasonal dependency in Sainsbury's GM on very warm weather as well. And so the impact of the year-on-year comp there brought some softness in the GM number too.

The next question is from Francois Digard at Kepler Chevreaux.

Just a follow-up on the space reallocation. You mentioned 3% of reallocation. Is it just that general merchandise at 3% less space, but is it a problem the total store? Or is it simply duplicable. Do we have to understand that it is 3% more space of food? Or is it a bit more complex than that? And can you quantify the good sales uplift on profit density benefit from this space reallocation versus the lost GM contribution?

Okay. Francois, I mean just to be clear, the 3% reduction in GM doesn't equate to a 3% increase in food space because the space of GM is clearly much smaller in the overall store. So we've reduced our GM space by around 3% in the year. and we'll continue through the course of the rest of this year, actually, particularly in some of our larger stores to move space from GM to feed. It's a program that's really working because obviously, as customers change the way they shop, we can tighten the ranges in GM. Actually, we can achieve a higher sales density on a smaller committed amount of space, but also we can invest that space both in ranges in food but also in giving more space to higher selling SKUs in food, which helps our efficiency plan. So that's the overall picture of what we're doing here. But broadly to your question, we've seen actually benefits to food in 2 areas of space. Obviously, we have opened some new stores in the period. And we said last time we talked to you that our new store program is adding about 0.5% and then in food, obviously, dependent on the store as we move space from GM, we invest that space in the core areas of the food offer that we think are going to be most able to drive both the profit density and the improvement of the offer for customers. And so that's what we're continuing to do. Overall, in the 3 years, we will convert north of 100 stores. But as I say, it's a 3% reduction in GM space is the key number there.

And do you have the dependent in the sense that 3% less in GM equal to how much more in food?

Yes. I mean I'm not going to give you a specific quantum to that. But I mean, broadly, what you can see is that we're reducing space in GM. We're investing in food. We're investing in fresh food. And if you were to go to our supermarkets, you can see broadly the proportion of space. So in most of our supermarkets before we began this program, broadly 2/3 of the space would be food and about 1/3 will be clothing within the clothing and GM space about half GM and about half clothing. So from that broad picture of our space, you can get to somewhere towards 1% improvement in food space. but it is dependent on the stores that we convert.

The next question is from Izabel Dobreva at Morgan Stanley.

Thank you for allowing me a second question. I wanted to come back on the topic of the guidance. So having listened to everything you have outlined, it sounds like towards the top end, the guidance implies growth in the retail profit somewhere between 1.5% and 2.5%. But at the same time, you've mentioned that you aim to outgrow the market in terms of sales by 1 point there's the benefits of retail media. You've said that the market pricing is still rational. So how would I then reconcile that versus the guidance? And the reason I ask is because if I try to what your guidance implies for the same [indiscernible] margin, excluding Argos, it implies that it's probably going to be down unless, of course, you have a much more muted assumption on volumes of the market. So why would the margin be down? And is that the right interpretation? Could you just help us reconcile that?

Thank you. Well, let me say a couple of things here. And then Blathnaid, if you want to comment, of course, and add to it. Look, I think 3 points I would make as well to your question. The first thing is we're 16 weeks into the year. So we're still at an early point in the year, and they saw a lot of uncertainty, which is why the guidance we set out in April and how we describe that is absolutely the case today. We expect to grow retail profit year-on-year. We've given a clear picture of what that looks like, the 1025 outturn last year plus financial services gets us to around 1045. And we have a plan that's very focused on delivering that. At the same time, we're seeing strong volume performance relative to the market, and that's the combination, obviously, our focus on value and the other elements of the offer, and we expect to outperform the market by around 1% this year. and clearly to deliver retail operating profit growth year-on-year, and we expect to deliver a positive margin outcome. So we've got a lot of the year still to come. And I would just make the point about balanced choice as being so important to us in the environment that's out there and we'll continue to make balanced choices in order to deliver the profit outcome we've committed to, but at the same time, continue to grow our volume, Blathnaid?

Yes. Great. And just to build on that, margin will always be diluted by inflation, particularly kind of the fuel price inflation as well that we see coming through. So that's some of the dynamics you see coming through in the P&L. But to Simon's point, we will make balanced choices as we travel through the year. What we've committed to is growing our retail operating profit year-on-year with the incremental financial services income as well on that.

The only other point is about we haven't mentioned in that sort of draw together, we obviously continue to live Nectar 360. And as we grow our volume, and as we talked earlier, one of the things that's important here is we continue to convert that increased net to participation into the strength of Nectar 360,and we're very encouraged with the continued progress there.

And just one quick follow-up, if I may. In terms of the ability to absorb the headwinds from the balance choices through cost savings, I might understand that a lot of the cost savings will be allocated into the Argos P&L this year?

So what we've guided in Argus is flat profits year-on-year, and we will make the choices traveled through the year on how we deliver that and where we invest in the Argos proposition on that. So there'll be some on to we haven't disclosed the exact split on the cost savings.

Yes. And I think more broadly, the GBP 1 billion cost saving ambition, we're very focused on what we need to do in this final year to achieve that. And that's clearly resulting to your question about strong plans in Argos and in strong plans in Sainsbury's too. I'd reflect that in the first quarter of the year, we're on track in delivering our cost savings at the same time as we've seen an improvement in our customer satisfaction performance. And I think that shows exactly the balance that we need to achieve, which is improving what we do for customers, finding cost and efficiencies and delivering improvements in our retail operating profit across the whole business this year.

And I think the other thing is, but if we stand back from August, we've got the dedicated leadership team in place, and this is a real setup year for them. So they've got good momentum at the moment and what they're doing on the range, what they're doing on position and how they're really getting after the cost saving program as well. So let's give them some space to make sure that they put in a really strong foundation to deliver well for the future on that.

And the final question is from Sreedhar Mahamkali at UBS.

Simon, just to go back to the value index. This time, it hasn't improved versus all of your competitors, but I also realize this doesn't include the personalized investments. If you could just talk through that, like I think historically, maybe last year, not necessarily historically. I think you talked about 1/4 of fourth or 1/3 of the price investment through personalized investment. Is that still where that is? Included that? Would it have improved the value index would have improved across all of the peer group?

Yes. I mean just -- thanks for that. I mean just to reiterate to the earlier point, we didn't set out to improve our value performance against competitors in the way that the quarters put. We set out to deliver the value commitment. We've always delivered against. And we've done that because that's what our customers best respond to. So when you look at our performance here, what we've done is, we've clearly made sure that we have managed passing through inflation the best way that we can because we need to get inflation through to the shelf, of course, where there is inflation through, but doing that in a way that's make sure customers continue to trust the offer that we have. I think then specifically to your question, within the range that you talk about, that's broadly right. A proportion of our value investment continues to go into personalize your net prices. Actually, we're finding the traction of that becoming even more sticky with customers, particularly as we come to a further period of time where you can access your Nectar prices at the main bank and supermarkets as well. And as you've seen, we've seen more customers using your net prices. So it's a very important part of our value equation, and we flex it and invest in it at different times of the year to make sure that in the total picture of our value, we're getting the best return in how we invest in value and in how customers respond. So yes, around a course to 1/3 is a good basis for the way we think about that. Okay. Just to check there's no final questions?

That was our final question.

All right. Great. Well, thank you very much, everyone, for joining Blathnaid and I. I'm good to be able to share the first quarter results with you. Obviously, into the second quarter after a really strong start last week with the weather. So more hot weather to come. Let's hope some more good results in the football to come to you. Thanks for your time this morning catch-up soon.