J Sainsbury H1 Earnings Call Highlights

Key Points

• Strong first-half performance: Grocery sales rose 2.9% and underlying operating profit from continuing operations increased 3.6% to £525 million, supported by volume growth, fresh food, online and delivery sales.
• Argos disposal reshapes the business: Argos is now classified as discontinued operations following the planned sale to Swift Partners, with Sainsbury’s recording a £215 million impairment and £102 million separation-cost provision.
• Outlook and shareholder returns improved: Sainsbury’s raised the lower end of its full-year operating-profit guidance to £1.025 billion–£1.065 billion, while continuing a £300 million buyback and expecting to return more than £600 million to shareholders this year.

J Sainsbury LON: SBRY reported higher first-half grocery sales, profit and free cash flow as its food-focused strategy continued to gain customers, while the retailer raised the lower end of its full-year operating-profit guidance after agreeing to sell Argos.

For the 28 weeks ended September 12, 2026, grocery sales rose 2.9%, supported by volume growth, while total Sainsbury’s sales increased 2.6%. Including fuel, continuing-operations sales grew 4.5%. Underlying operating profit from continuing operations increased 3.6% to £525 million, while underlying earnings per share rose 10.4%.

Chief Executive Simon Roberts said the company’s performance reflected continued investment in value, food quality, availability and service. He said fresh-food sales rose more than 4% in the first half, while online sales increased 9% and Food OnDemand sales grew 27%.

Food strategy and customer investment

Roberts said Sainsbury’s maintained its value proposition through Aldi Price Match, Nectar Prices on almost 11,000 products, and personalized Your Nectar Prices offers. Customers have saved £250 million through Your Nectar Prices since its 2021 launch, according to the company.

The retailer also cited its food innovation program, which is expected to include more than 2,000 new or improved products this year, including more than 700 products across its Taste the Difference and Discovery ranges. Taste the Difference sales have risen nearly 50% over the past four years, Roberts said.

Sainsbury’s opened 14 convenience stores and two supermarkets during the half, with the two supermarkets converted from former Homebase sites. It also invested in around 170 stores, with those locations reporting stronger volume growth and higher customer-satisfaction scores than the rest of the estate.

The company has been reallocating store space from general merchandise to food, particularly fresh food. General merchandise sales declined 5% year over year, in line with the retailer’s expectations, as it simplified ranges and devoted more space to food. General merchandise volume per stocking point increased 10%, while sales in the toys category rose 13% after a range reset.

Roberts said Sainsbury’s completed its largest fresh-food range reset across its supermarket estate, expanding space in categories including meat, fish and poultry. The company also plans for 60% of products across fresh produce, dairy, meat, fish and poultry to be covered by long-term supplier agreements by the end of 2026.

Argos sale reshapes reporting

Chief Financial Officer Bláthnaid Bergin said Argos is now treated as a discontinued operation after Sainsbury’s agreed in July to sell the business to Swift Partners. The transaction is expected to complete in February 2027, with full separation expected by February 2029.

Argos recorded a first-half operating loss of £8 million. Sainsbury’s recognized a non-cash impairment loss of £215 million on the disposal and a £102 million separation-cost provision, largely related to technology. Bergin said further separation costs will be recognized as the exit is finalized.

The Argos disposal also resulted in impairment charges within continuing operations, including £87 million of divestment costs related primarily to non-trading sites, Sainsbury’s stores and disposal-related fees. The company also incurred £8 million of final bank-exit costs during the period.

In July, Sainsbury’s handed back its banking license, completed the exit of final bank colleagues and exited its remaining loan contracts.

Cash flow, returns and outlook

Free cash flow increased by £57 million year over year, aided by higher profit, working-capital movements and £71 million lower capital expenditure, largely due to the timing of spending. The company generated £333 million of free cash flow in the half and continues to expect more than £500 million for the full 2026/27 year.

Sainsbury’s said it remains on track to generate at least £1.6 billion of free cash flow over the three years to 2027. Net debt to EBITDA was unchanged year over year at 2.6 times, within its target range, while return on capital employed improved 20 basis points to 9.2%.

The company completed £200 million of a planned £300 million share buyback in the first half and expects the remaining £100 million to be completed in the second half. It proposed an interim dividend of 0.41 pence per share, representing 30% of the prior year’s full-year dividend. Sainsbury’s expects to return more than £600 million of cash to shareholders this year.

For the full year, Sainsbury’s now expects underlying operating profit from continuing operations of £1.025 billion to £1.065 billion. The prior range, adjusted to exclude Argos, was £965 million to £1.065 billion.

Management said the midpoint of the new range implies continued profit growth in the second half, despite subdued market volumes, heightened promotional activity and customer concerns over living costs. Roberts said the company would focus on profitable activity and would not pursue sales initiatives that are not sustainable or profitable.

Looking ahead, Sainsbury’s said it expects another competitive holiday period, supported by its largest-ever Christmas Taste the Difference program. The company is also continuing work toward a £1 billion cost-savings target under its three-year Next Level Sainsbury’s strategy, which would bring total savings to £2.3 billion over six years.

About J Sainsbury (LON:SBRY)

J Sainsbury plc is one of the UK's leading food, general merchandise and clothing retailers. Offering delicious, great quality food at competitive prices has been at the heart of what we do since we opened our first store in 1869. Today, inspiring and delighting our customers with tasty food remains our priority. Our purpose is that driven by our passion for food, together we serve and help every customer. Our focus on great value food and convenient shopping, whether in-store or online is supported by our brands – Argos, Habitat, Tu, Nectar and Sainsbury's Bank.

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