Good morning, everyone, and Happy New Year, and welcome to the quarter three Sainsbury's trading update call which covers the 15 weeks to January the 4th. I'm joined here today by our CFO, Kevin O'Byrne.

I will ask Kevin to run through some of our quarter three highlights in a moment, and then we'll hand over to you all for the Q&A. So Kevin, over to you.

Thanks, Mike, and welcome, everyone. I'll now take you through some of the key numbers.

Looking at grocery first, sales grew by 0.4% representing a continued outperformance of our key competitors in both value and volume over the quarter reflecting the investments we've made in the customer offering in our stores over the last year and the ongoing improvements in service and availability. Behind the total, sales growth of 0.4%, we saw lower inflation this quarter versus last year.

So, this actually represents a slightly better volume performance in a slower market despite a reduced benefit from new space. And we continue to generate strong growth in our online grocery business, up 7.3% in the period.

General merchandise sales fell by 3.9%. Argos delivered a strong performance over the Black Friday period and outperformed a weak market in consumer electronics, but was heavily impacted by very weak toy and gaming markets where we have large positions both of which saw double-digit declines.

The gaming market, in particular, was down more than 35% impacted by an absence of new product launches. Argos customer service metrics remain strong over the period with more customers shopping online and taking advantage of our click and collect and delivery services.

Prepaid click and collect sales for example grew by 16% providing a great customer experience and of course reducing costs as people collected the products themselves. Finally, looking to clothing, sales grew 4.4%.

Full price sales grew by nearly 8% with sales of seasonal products helped by the colder weather earlier in the quarter. And sales were - helped by very good performance from our Christmas party and gifting ranges.

Online clothing sales grew by more than 40% and in the period, total group online sales accounted for more than 20% of the business, up 5% year-on-year. So, overall, a tough backdrop and some challenges in general merchandise, but a good performance from our grocery business in a weak market.

Operationally, we’re in very good shape across the business with strong availability and service and we've exited the quarter cleanly from a stock point of view. We'll now open up the call for your questions.

Hi good morning all Happy New Year.

Happy New Year.

So two questions for me so first off, I would just - I’ll ask the consensus question, because I'm sure somebody else will put your thoughts on this year’s number, but perhaps also next year's forecast as well, very early stages I know. Second question, obviously some weak performance in the GM business, particularly as you mentioned in clothing - in toys and gaming.

But to what extent does that matter for profit. Is there a significant exposure from a profit point of view to those categories, is it really just a bit of top line?

I'll ask Kevin to answer both of those, I think.

Okay and Andrew, first on consensus, we don't traditionally comment on profit in a trading update. But as you will expect, if we’d something to say about consensus, we'd say it's - so you can infer we are comfortable with consensus.

And next year and from memory consensus is about - is up 1%, 1.5% or something. We honestly haven't completed our budgeting for next year et cetera, but that doesn't seem and unreasonable at this point.

And on the general merchandise, of course, they all contribute. You’re absolutely right.

Toys and gaming would be generally lower gross margin products in the mix. So they're less impactful than sales shortfall in some of our other categories like home, for example and general merchandise.

But of course, they all contribute. So we've had to do some good work on costs to manage the bottom line.

Okay that’s clear. And then just to come back to the food business, mostly any standout areas there.

I mean the performance for you is, as you mentioned better than peers and also any of the listed peers at least? Thanks.

No, it’s reasonably sort of even in its performance either there will be Taste the Difference volumes grew. So, that was a particular box we continue with the program of rolling out opening price points.

So, we're on track to deliver what we said we would deliver. And then, there is a lot of - store refurbishments that's gone on during the quarter.

So, it's a very rounded sort of blended performance - the operational stat is probably the other standout thing where year-on-year all of the metrics we measure on, customer satisfaction, move forward. Our availability was as good as ever been and things like speed the checkout were significant improvements year-on-year, which is testament to all the work that we’ve done in investing in self-checkouts, but also SmartShop.

We look at SmartShop as a factor in of itself around 15% of sales in the stores that have it. So, around about 500 stores went through SmartShop over the entire quarter, which shows - how much our business is changing and how rapidly it’s changing.

Andrew, just building on Mike’s point and the Taste the Difference volumes grew but turn to our data yesterday would also show that we were the only traditional retailer to show growth in value own label sales. So it was a very balanced performance.

Okay thanks, guys.

Yes hello, thank you for taking my question. I just had a question with respect to space addition.

Maybe if you can talk us through the different dynamics into this quarter and how you see that evolving in 2020. And then the second question is coming back to toys and gaming.

There is - definitely a bit of a structural element which most of the shift you have due to people using more tablets and not necessarily playing with games but just wondering in terms of 2020. If there is any levers that you actually think could potentially reverse the trend seen in the quarter?

Thank you.

Firstly, Maria, I'll talk maybe to the property ones. We've seen space reduction in the - well broadly flat actually in food and reduction in general merchandise in Argos stores.

And the dynamic behind the scenes was we closed about 23 convenience stores which we announced at the Capital Markets Day. So, we're just been getting on with doing that - in the period.

So, we had a negative space drag on the convenience business - in the period. Clearly that's beneficial from a contribution point of view.

And you'd expect that you would see in time space being reduced in the business particularly in Argos, as we close existing standalone Argos stores and don't replace all of them with store and stores.

Yeah, on the specifics around toys and gaming, you can take it as read that we'll do a big review post-Christmas because clearly in the case of toys, it's now the second year running where there's been significant reductions year-on-year. And we need to make sure that we're maintaining our market share and our competitiveness in that part of the market.

On gaming, it’s clearly a structural change in the sense that more gaming is going online. But this year, it was mainly driven by the absence of sort of big console launch and we’d expect cyclically that, that would happen next year, this time next year.

So probably a combination as you say of structural changes in the marketplace. But also we need to go back and make sure that we’ve got the right exposure to the right categories in those markets as we go into next Christmas.

Of course, this time of year and beyond it becomes much less significant as a proportion of Argos’ business. So it’s really only in the key Christmas quarter that these categories come into their own and they pay a disproportionate parts of the Argos general merchandise sales.

Hi, good morning, everybody and Happy New Year. My first question is trying to read and your commentary on whether the market in the UK is really getting worse or not.

I took note of what you’re saying about your fixed price lockdown thousands were in the products at face value they seem big price goods. I look at the counter data showing market growth is 0.2% which is also much worse than before.

So would you assess that today’s topline market - and the market overall the amount of price investments, you guys have to put in is making things worse again or this is the normal humdrum unusual promotional and trade planning announcement. The second one is, is there anything more you can say about your new value-oriented products that you were launching when you had this on the Capital Markets Day.

You made it clear they weren’t going to get prime position. You thought that was necessary.

Any change in the way you’re approaching the merchandising, the rollout any successes or failures that you think are worth discussing? Thank you.

Yeah. I mean - if you look at the market I mean, I showed a chart last night at our leaders’ group which basically says the growth in the grocery market a step down from around 1% to as you've already rightly pointed out, virtually zero.

That's partly a function of value falling out of the market. And I guess if there is a structural decline in volumes probably too early to call it.

But clearly the Christmas quarter would suggest that there's been a decline in grocery volumes over the quarter. Whether that's specific and uniquely to the last quarter, I don't think we’ll really know until this time next year when we've got the sort of full extent of the overall trends.

But probably the biggest headline driver of the market has been the reduction in inflation which by implication is a result of the market being more price competitive. We are pleased in the sense that our relative volume growth is higher than our value growth.

So from that perspective, we are seeing - the actions that we are taking coming through in the stuff that we sell. And there's not a lot we can add to the opening price point story in the sense that we don't do a lot of stuff in the area, a lot of category reengineering over the Christmas period.

We kind of get back into the full throw of that in the last quarter. So, I suspect we won't talk more extensively about this until we get to our premiums update in May.

So, there's not a lot more other than what we've already said and certainly not any significant changes in our approach.

Thank you.

Good morning, gentlemen, and yeah, a very happy New Year to all.

Happy New Year.

Post the general election, everybody in the north is full of the beams of joy.

[Red Bull], Clive.

Red Bull and I just wondered in that respect Mike, given you are and experienced player in this industry.

You always tell that to me. Thank you.

Do you see the potential given greater or given less uncertainty and perhaps stimulation by the government through a variety of levers for household expenditure to improve? And in that respect, do you think it's reasonable that the grocery industry should capture some of that?

Yeah. I mean, certainly, post the general election, we saw no difference in the trading pattern in our business.

And I have talked on the media call about the fact that you could characterize ours as almost twin peaks. We had a very strong month end in November it then got really flat in the first few weeks of December, and then peaked very strongly around the weekend before Christmas and Christmas week itself so, nothing obvious directly after the general election.

And when it comes to how our customers are feeling, I suspect your analysis is right. It will largely come down to the sentiment out of the budget probably over the next most significant event in March.

In theory at least, the customer trends should work in favor of retail in the sense that customers have more disposable income. Inflation is comparatively low and, therefore, that should reflect itself in trading up in grocery and in people buying non-consumables.

I think the story of Christmas will be that that's not actually reflected in what customers have really done. And, of course, another significant announcement in the last few weeks has been the 6% increase in national living wage, which again you'd have to believe should ultimately flow through in customers having more [indiscernible] using that money to buy stuff that we sell.

But to be quite honest, Clive, we are planning on the basis it's not going to get any better in the next year and that we'll structure ourselves accordingly if there are fiscal stimulus put into - in the market as a result of the budget or anything else the government chooses to do. Then we’ll benefit from that as and when that happens, but I'm not holding my breath.

And just your comment on national living wage, is that ahead of what you would have been expecting prior to the election?

Yeah for sure I mean, if you take this all general trend, it's in the order of 4% or 4.5%. So absolutely but we're in a great position in the sense we made a big move to £9.20 an hour.

So we've got plenty of headroom between where our national living wage will go and where we are currently. And we reflected on the fact that having made that big year-on-year increase, we effectively have no wage inflation in the second half of this year.

And as we look forward in next year, we’d obviously take a view on where we need to pitch ourselves in the light of the national living wage for the next wage round.

And just as a second and final question should that be and the 20% participation online across the group. Where do you see that progressing and just in terms of a general expectation over the next few years?

Well, I think you could probably attribute 5% to 10% growth year-on-year-on-year. So, that will gradually move towards 25%, 30% on that kind of basis.

And plus or minus a bit and it’s the question around space you’d expect to have less retail space in five years’ time. So the way that the shape of the business in five years will really certainly be probably 25% to 30% online, 75% to 70% through core physical real estate, and that’s very much in line with the way that customers achieving to shop.

And we’ll hand on the [indiscernible] this year and that broad direction assuming that nothing changes in the way that customers are behaving.

And, Clive, you’re seeing quite a dramatic change in Argos if you look at year-on-year we've gone from about 35% to the sales in stores. Last year, people came in we didn’t know they were coming before they hadn’t reserved anything this year it’s dropped down to about 31%.

So, we're seeing quite a move. We still got lots of people coming in to collect things in store, but that's also reducing slightly - to the overall store mix is reducing.

The nice thing is our leases are on four years average leases, so we can change the shape of these states as a customer habits change.

Well, thanks very much for the comprehensive answers and all the best, guys.

Thank you.

Thanks, Clive.

Thank you. Good morning and Happy New Year good morning.

Just - if I may just follow up on your grocery volume comments, I'm not sure about the last four weeks but I think Kantar has like-for-like inflation is incrementally positive and as you say below the market. Would be broadly agree with that observation?

Then, secondly, still on grocery on your promotions, could you comment on that the shape of your promotions and like-for-like promotions in or through the quarter. And I guess that's with regard to the usual levels of fuel BWS and I guess [Twist Wraps] given the season?

And then, lastly, on general merchandise, could you give a sense of the negative space impact in the minus 3.9%? My understanding is that there's a small positive contribution in grocery.

So, presumably there's at least a few 10s of bps in the minus 3.9%. And then, I guess sorry.

Keep going…

Just so foreign promotions if I may. On Kevin's inventory comments, I think clearly not a problem in clothing whatsoever, but presumably you successfully cleared the general merchandise inventory in the period?

Thank you.

Yeah. I'll ask Kevin to comment on the second two and I'll have a go at the first two.

I think I'll defer to James, to sort of explain behind the scenes exactly what the shape is. But broadly speaking, our volumes we are deflating sorry, we're inflating less than our competitors.

Yeah.

The best way of summarizing it.

Do you have a negative mix as well presumably?

Yeah so, the realized value per item is less than it was, if that makes sense. But you can - it's probably better to have a more detailed conversation with James behind the scenes to sort of unpack the Kantar data because it probably hides a multitude of things.

But by definition, if we're putting more opening price points into the business and that part of our business is going, it has a effect on the average price per unit sold. And as we've described at the Capital Markets Day, our measure of success is that we grow our volumes and…

Sure.

Our cash profitability, which broadly speaking is in line, if not we are actually achieving probably slightly ahead of that ambition. As far as promotions in the round, lots of noise as usual we have pretty intense trading period.

But if you look at fuel and wine, we didn’t really do a lot in [indiscernible] but fuel and wine, we did more. But then all our competitors did more.

And if you look at fuel stunts number of days on promotion then Tesco were almost twice where we were and Morrisons were about 60% higher than where we were. And both of them basically added more days and we added about the same number of days year-on-year, similarly on wine.

But on the other side of the equation, if you look at Kantar, it will show that our ongoing promotional participation actually dropped year-on-year. So, in the round we would take the view and we'll need to do the analysis.

So, this is very much sort of first cut but we take the view that, broadly speaking, the business is about the same promotional weighting year-on-year. So, we think broadly speaking it plays a draw against a backdrop where the level of promotional intensity probably went up and probably the most significant number is the fact that people like Aldi were actually more promotional year-on-year, significantly more promotional year-on-year which would suggest that they were also driving it, keeping that drive.

Yeah and a little, I guess, as well. Okay no, that's helpful.

Thank you.

Little around of big promotion [Daily Mirror] promotion which year-on-year…

Yeah.

Would be quite significant for them and then, on space and inventory, Kevin.

Yeah. Nick, on space, the impact of space reduction in the Argos estate would impact sales by about 0.4 of a percent and…

Thank you.

And then, if you look across stock, the areas we’d worry more about in general merchandise, if you think like electronics just because they have a shelf life…

Yeah.

With just fashion items so, we don't really have an issue there. We clearly have a little bit more toys, but it's all just stuff that we can trade through in the coming period.

Okay super. Thanks so much.

Thank you.

Hey. Good morning, guys.

Happy New Year.

Happy New Year.

A quick - first one on the food inflation, can you just give us an idea of in absolute terms what the inflation numbers now running at and how that compares to the previous quarter?

No obviously sure but Rob.

Could you, maybe the size of the move Mike, quarter-over-quarter?

A bit of color, Rob it’s less than 1% and as you'd expect, the deflation in kind of grocery, meat, fish, poultry, produce, et cetera in the period, and a little bit of inflation in other areas not-fresh areas, and broadly less than 1% across the piece.

Okay and that’s down what, maybe 100 bps since the previous quarter or less?

Yeah, it will be because and particularly with the mix of fresh and produce in the Christmas quarter will impact us.

Okay thanks very much. And then, a couple more on the GM side of things You mentioned that Black Friday was very strong.

I think this time last year you were saying you didn't play in Black Friday. Should we read that saying you decided this year you needed to get involved in Black Friday?

And then the second one on the GM side, just give us an idea if you could what percentage of sales the gaming category represents? Thanks very much.

Yeah. On Black Friday, we didn't say we didn't participate last year.

We just said that we - down-weighted some of the activity particularly in the Sainsbury's channel. So, we did a lot less in the supermarket chain.

Black Friday this year was mostly helped by the fact that it moved back by a week year-on-year, and therefore, it coincided with payday which meant for the market generally and for us in particular it was incredibly strong. But it, probably on balance, brought forward sales from the subsequent few weeks.

And I've referred to the fact that you could argue you've seen that the Argos business it was basically a story of two peaks: one, to coincide with Black Friday fueled by the fact it coincided with the payday and then Christmas week itself, or the weekend before Christmas was incredibly strong as well. But the bid in the middle was challenging and I suspect that will be reflected across the market.

Rob, on…

Does that - or when you sell more on discount?

We basically buy the stock to sell and we'll sell it as and when our customers want to buy it. But basically they have money in their pocket to buy over the Black Friday weekend.

And that was reflected in our sales and probably the market more widely if you look at the BRC data.

And Rob on the size of the - what we've talked about before the gaming and toy markets over the Christmas period will be just over 20% of the GM business. And we've got big shares in these markets.

We've got about 18% of the gaming market in the UK. We've got over 30% of the toy market in the UK.

So, they're very important to us in this quarter.

And would they roughly split half-half gaming and toys within that 20%?

Toys will be bigger.

Thank you very much.

Yes good morning and Happy New Year actually. One quick one actually from me you have been offering better value in recent months.

We can say and you have been developing the enterprise products. While you continue that journey do you think that you made half of that or are you almost at the end just to go towards what is left for 2020-2021?

We said we’ll be effectively 90% complete by the end of this financial year. So, that's about eight weeks to go, and I think we are 160 down and counting.

So, there's still work to be done. As we've already referenced, there’s sort of the six to eight weeks before Christmas where we don't do any significant category reengineering because it's not a good time to be doing it.

But we'll clearly get back to throw our things in the final quarter. So, work to be done but by [indiscernible] that we're probably two-thirds of the way through the range development as we stand today.

Right and if I may add actually, in terms of pricing, where do you stand today? Are you happy with your price positioning today or do you think you need to do more going forward especially given the value improvement you had?

Yeah. We were happy with our price position in the sense that it's a measure of today, who knows what the competitive dynamics will be in the future, and we'll ride with the cut and thrust of very competitive grocery market and our ambition continues to be that we would want to grow our business across all of the category tiers not just one category tier.

So we would judge success, not just by growing out any price point, but also by growing Taste the Difference distinctive brands and our standard branded and own label ranges. So to fill the path evenly rather than at one particular end or the other.

Okay. Thank you.

Hi, guys, and Happy New Year.

Happy New Year.

A few from me if I could do on the GM side, just thinking about the mix of sales particularly on the online business, you flagged that click and collect growing a lot quicker than the Fast Track delivery. And I'm just wondering whether you've got sort of one eye on running was a little bit more from a - sort of with a focus on cash profit rather than sort of driving the growth in things like the Fast Track delivery.

The second question just on the toy and gaming category again, it just seems like a category where you seem to have struggled a bit more than some of the other players in the market over the past couple of years. And just wondering, is it a category where you underperformed the market and is it one where you feel sort of competitors are perhaps targeting you guys a bit, given you've got such a big market share in things like toys?

And then, the last one was on the consumer electronics side of things where you've clearly outperformed, but there's no comment on sort of the market. I mean, have you outperformed the good market there or given the overall like-for-like, is it fair to assume that all categories across GM were a bit challenging?

I’ll let Kevin have a go first and then give some color afterwards.

On the consumer electronic market, your last question, Andrew, the market is down a bit and we outperformed that, as you said, so it's down a few percentage points. And now we've only got a detailed measure on the market up till the end of November so we don't get the full December measure, but we think that trend continued.

Toys and gaming, I disagree. I think we've held our share well over the recent periods.

We've had a bit of share pressure recently in toys in some of the infant and some of the preschool areas in a competitive market. But over a longer period of time we’ve held our share there.

We'll need to revisit that after Christmas, as we always would and see the more we can do. At gaming, we're comfortable with our share position in gaming.

Okay, just a follow up on toys if I could do very quickly. It's one where people will have a little bit more optimistic this year because it’s seems to be a few more events around Frozen II.

Did that just come a bit late and it just didn't come through off?

Yeah I mean as Kevin has already said, it’s too early to have done the complete post-mortem but for the second year running, the toy business was down double digits. So broadly speaking toy volumes has dropped by around 20% over two years.

And as a big player in that market, we've clearly taken our share of that impact. The question that was asked earlier is what extent is that structure in people just fundamentally changing their habits.

How much of it cyclical because of this sort of release schedule. And that's a piece of analysis we'll have to do once we've seen all the market data.

We don't see ourselves losing share in the way that you've described and clearly, it's a market that people would look at or our market share that people would look at avariciously but nevertheless, we think we've done a pretty good job of, broadly speaking, maintaining our share. And the other point to make which is pretty obvious is that those categories are disproportionately large in the run up to Christmas and therefore have less impact in the sort of normal, such as they are normal trading periods post-Christmas and for the rest of the year.

Thanks that's really helpful. And just on the profitability within Argos, have you been a bit more profit focused?

We're always profit focused, but we always strike the balance between offering fantastic value to our customers, maintaining high levels of service throughout our business and generating profit and cash. But you can take it as read and certainly in the analysis we gave at the Capital Markets Day, one of the key measures of our ongoing investor sale is the fact that we are a cash generative business and we will look to reduce our debt significantly over time.

And you know, we're in line to do that this year and we'd expect to do it in the subsequent years on the back of the work that we've done, and clearly all this plays a part in that.

Thanks a lot for the answers, guys. It's really helpful.

Thanks, Andrew.

Okay, thank you, everybody. I wish you all a Happy New Year.

I'm sure we'll see you over the next few weeks or months, and wish us luck in the last quarter. Thank you.