Sainsbury's reports strong year, will buy back £200m more shares

17th Apr 2025 09:01

(Sharecast News) - J Sainsbury reported a strong set of full-year results on Thursday, with solid momentum across its grocery business and a significantly strengthened balance sheet supporting further shareholder returns.

The FTSE 100 retail giant said that for the 52 weeks ended 1 March, group sales excluding fuel rose 4.2% to £26.6bn, driven by continued market share gains in grocery.

Fourth-quarter sales at the core Sainsbury's brand rose 4.1%, while Argos returned to growth with a 1.9% increase in fourth quarter sales.

However, full-year sales at Argos fell 2.7% to £4.9bn, reflecting a weaker first half, while fuel sales declined by 8.9% to £4.7bn.

Retail underlying operating profit increased 7.2% to £1.04bn, with strong double-digit growth at the grocery division offset by lower Argos profits.

Statutory profit after tax jumped 77% to £242m, though that included £297m of non-underlying post-tax charges primarily related to restructuring in the financial services and retail divisions.

The group generated £531m of retail free cash flow, in line with guidance, and completed a £200m share buyback while raising its full-year dividend by 4% to 13.6p.

For 2025-2026, Sainsbury's said it was planning to buy back at least another £200m of shares and return £250m to shareholders via a special dividend funded by the proceeds of its banking disposals.

Any additional disposal proceeds above £250m would be used to expand the buyback further.

Looking ahead, Sainsbury's said it expected to deliver around £1bn of retail underlying operating profit and generate retail free cash flow of over £500m in the current year.

Profit delivery would be weighted toward the second half, reflecting the timing of store openings and space reallocation initiatives.

The group's 'Next Level Sainsbury's' strategy delivered record grocery performance over the year, the board said, including the highest market share gains in more than a decade and consistently growing food volumes across all channels.

It said it was accelerating investment in food space, with plans to open 15 supermarkets and 25 convenience stores this year - its largest expansion in over 10m years.

In addition to new stores, around 90,000 square feet of food space would be added through rebalancing existing sites.

Sainsbury's also saw strong progress in digital and convenience formats.

Online grocery sales rose 7% year-on-year, with further improvements in customer satisfaction and personalised promotions.

Convenience sales increased nearly 4%, helped by range improvements and the rollout of 'Aldi Price Match' to smaller stores.

The OnDemand rapid delivery service grew by around 80%, now reaching over 65% of the population.

Loyalty and retail media remained a growing source of differentiation and profit.

Participation in 'Nectar Prices' reached record highs, while the Nectar360 media business added £39m in incremental profit as it expanded its client base and digital in-store screen network.

Argos meanwhile showed signs of recovery in the second half following a challenging start to the year, with improved online traffic, better stock flow and the introduction of over 4,000 new supplier-direct products.

Operational efficiency improved, with a 12% reduction in net stockholding and rollout of digital collection points and enhanced app functionality.

The group also achieved cost savings of around £350m during the year, and remained on track to reach its £1bn target by March 2027.

Key drivers included continued automation, front-end transformation, and technology investments, including a partnership with Microsoft to integrate AI and machine learning.

Financial services operating profit rose 3.4%, supported by cost controls and the phased exit from core banking.

The disposal of the bank's core assets, ATMs, and Argos Financial Services was expected to complete shortly.

Going forward, Sainsbury's said it expected to generate sustainable annual profit of at least £40m from remaining financial services tied to the retail business.

The retailer's strengthened financial position was underlined by recent investment grade credit ratings from S&P and Moody's, and its first unsecured bond issue in over two decades.

Capital expenditure totalled £825m in the year, as the company continued to invest for growth while delivering increased returns to shareholders.

"We've transformed our business over the past four years," said chief executive officer Simon Roberts.

"We have created a winning combination of value, quality and service that customers love, investing £1bn in lowering our prices.

"More people are choosing Sainsbury's for their main grocery shop as a result, delivering our highest market share gains in more than a decade."

Roberts said the company was committed, above all else, to sustaining its strong competitive position, adding that it expected to continue to outperform the market.

"Our customer offer is the strongest it has ever been - we've expanded Aldi Price Match to more products than ever before in addition to offers on more than 9,000 products with Nectar prices.

"Customer satisfaction with product availability is at record levels and we're continuing to add more new, innovative products to our ranges. Nectar is taking our ability to create personalised value and loyalty to the next level and our long-term contracts with farmers and suppliers demonstrate our commitment to resilience and sustainability across the UK food system.

"Our belief in the strength of Sainsbury's offer has driven our decision to make our largest investment in expanding our store space in over a decade as we open supermarkets in key new locations and extend food space within many of our existing stores."

At 0840 BST, shares in J Sainsbury were up 3.4% at 256.6p.

Reporting by Josh White for Sharecast.com.