• Underlying PBT in line
    with expectations
  • Total dividend per share
    unchanged at 14.32p
  • New management team
    accelerating pace of change
  • Clear leadership and
    focus on Sainbury’s UK Supermarkets
  • Strong performance in
    Shaw’s – including Star Markets
  • Strong like-for-like
    sales growth in Homebase
  • Acceleration of e-commerce
    strategy across the group.

J Sainsbury plc today announced
underlying profit before tax, in line with the range indicated in the third
quarter trading statement, at £580m, down 23.2% on the previous year.
Group sales were £17.4 billion, up 6.3% on the previous year. Underlying
basic earnings per share was 20.5p, down 24.1%. Total dividend per share remains
at 14.32p.

Shaw’s and Homebase both
performed well. On a comparable basis Homebase’s sales were up 13.2%, including
like-for-like sales growth of 12.1%, and operating profit was up 9.1%. Shaw’s
sales, which include Star Markets acquired during the year, were up 25.7% with
operating profit up 46%. Sainsbury’s Supermarkets reported sales up 1.8% and
operating profit, before e-commerce costs, down 27.2% on the previous year .

Sainsbury’s Bank, in its
3rd year of operation, reported an operating profit of £2.9m and over
one million customer accounts.

Sir Peter Davis, group chief
executive said, “These results demonstrate that, while we have two very
strong businesses in Homebase and Shaw’s and have made good progress with Sainsbury’s
Bank, we need to focus our efforts on our core supermarket business.

“Since my appointment
in March 2000 I have concentrated on arresting the decline in Sainsbury’s Supermarkets.
We are working hard to re-establish ourselves as the UK’s favourite food retailer
by making the Sainsbury’s experience special again for customers and colleagues.
We are now prioritising our tasks for the coming year and will invest for longer
term growth.

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“The Sainsbury’s brand
is a very strong asset; it stands for good quality and value for money. It also
stands for high and consistent store standards as well as specialist advice.
We excel in key areas within our business; we sell more organic food than any
of our competitors, lead the market with our ‘ready-meal’ offering and our Be
Good To Yourself range is now one of the best selling brands in our stores.

“We have reviewed and
restructured the group and supermarket boards to clarify the role of both and
help accelerate the pace of change. A new group executive committee has responsibility
to develop long term strategy for the group and replaces a number of other committees
to help us make decisions, move quickly and take ‘best practice’ across our
operating companies.

“We are concentrating
on improving store standards to bring all our stores up to the standards of
the best. Our new London Colney store is a good example of how larger stores
will operate in the future and our Central and Local formats designed with specific
customer requirements in mind have also been successful. Last year we opened
20 stores (including four locals), extended 22 and refurbished 16.

“We are implementing
a thorough and radical re-engineering of our processes and systems to achieve
optimum performance. We were the first UK retailer to invest in the GlobalNetXchange
which, through Oracle, already has the technology in place to help us reduce
costs and will deliver streamlined systems and improved product availability.

“We will be accelerating
our internet shopping service Sainsbury’s To You; a new dedicated picking centre
in west London opens this summer to service customers within the M25 and smaller
centres and stores will now also be used to speed up this service in major connurbations
outside London.

“Customers tell us
that they look to us for advice and ideas. Our ‘Taste for Life’ website being
launched in June provides exactly that and we believe will be the best in the
UK for food and drink. This will provide a superb platform for the future as
we work with Carlton to establish a leading presence in the new internet and
interactive TV channels of communication and commerce with our customers.

“Homebase is now a
substantial number two in the UK DIY market with many opportunities for growth.
Its large store format trial has been successful at Greenwich and Dundee and
there is now a major roll-out programme. The e-commerce strategy for Homebase
is well advanced and will be launched later this year providing another significant
growth opportunity.

“Shaw’s has performed
well during the past year and the integration of Star Markets has gone smoothly
consolidating Shaw’s as a strong regional player. Shaw’s has dramatically improved
its store formats and customer offer. A focus on a food and drug concept and
a strong emphasis on perishables has helped it compete successfully in the US
market. Growth prospects are encouraging with further benefits expected from
the Star Markets acquisition.

“Recovery will take
time, however, our venture with the GlobalNetXchange and other steps we are
taking to re-engineer our processes will deliver cost savings in the longer
term. We are managing our property portfolio aggressively both in releasing
value through our sale and leaseback scheme and in reviewing development potential
in our existing estate and our head office complex.”

“As I said when I rejoined
the company, I am determined to make Sainsburys somewhere special to shop again
and somewhere special to work. I am now even more determined, but also confident
that we can.”

The Board is committed to turning around the profit decline in the supermarkets
business. This will require investment in the customer offer, existing estate,
accelerating the home delivery service and, over a longer period, in information
systems and the supply chain. These investments will take time to benefit profits.
There are significant opportunities to restore profit growth in subsequent years
and to deliver increasing returns to shareholders.

In view of this confidence,
and the Group’s strong asset base, the Board felt it was not appropriate to
cut the dividend but to maintain it at last year’s level (on a comparable 52
week basis).

Financial Results



Turnover inc VAT (£m)
Underlying pre tax
profit ** (£m)
Underlying earnings
per share **
Dividend per share

* 52 weeks to 3 April 1999
** Before amortisation of goodwill, exceptional costs and non-operating items.
*** On a 56 week basis, dividend per share was 15.32 pence in 1999.

Group sales grew 6.3% to
£17,414 million in the 52 weeks ended 1 April 2000 with the acquisition
of Star Markets in the US and a strong sales performance from Homebase being
the main contributors to this growth.

Underlying Group pre tax
profit (before amortisation of goodwill, exceptional costs and non-operating
items) was 23.2% lower at £580 million, within the range indicated in
our January trading statement. Underlying basic earnings per share decreased
in line with this by 24.1% to 20.5 pence per share. These reductions were entirely
due to the profits decline in Sainsbury’s Supermarkets.

Net exceptional items for
the year were £60 million, an increase of £5 million over the first
half. The second half included additional severance and restructuring costs
of £11 million and store closure costs amounting to £46 million.
This was offset by net property profits of £52 million, including a property
profit of £82 million generated from an innovative sale and leaseback
of 16 UK supermarkets.

The Directors propose the
payment of a final dividend of 10.30 pence per share payable on 28 July 2000
to shareholders on the register at the close of business on 16 June 2000. This
results in a total dividend per share for the year of 14.32 pence – the same
level as last year on a comparative 52 week basis.

UK Supermarkets

Sales in Sainsbury’s Supermarkets increased by 1.8%. Adjusting for Easter, like-for-like
sales growth in the second half of 1.4% showed an improvement over the first
half decline of 0.9% with sales in the third quarter benefiting from strong
Christmas and Millennium sales.

Sales growth was impacted
by price competition and, during the second half, by food price deflation. During
the year, price inflation was around 1% and in the fourth quarter was 0.6% primarily
due to petrol price inflation, with underlying food inflation being negative.

The overall cost base increased
largely due to inflation in labour and rents. This, combined with slightly lower
sales volumes and low price inflation, resulted in a decrease in underlying
operating profit to £542 million, before e-commerce costs of £19.7
million, a reduction of 27.2% over the previous year.


  • A strong Homebase sales
    performance reflects the success of our value repositioning which was launched
    at the beginning of the year. Reported sales growth for the year was 10.0%
    with operating profit down 13.4% to £64.6 million before charging e-commerce
    costs of £7.6 million.
  • Given the importance
    of Easter trade to Homebase it is necessary to look at comparable trading
    periods. The most recent year that includes a full Easter trading period in
    both the current and comparative years is the 52 weeks to 4 March 2000 (i.e.
    four weeks earlier than the statutory reporting period end). Sales for this
    period show an increase of 13.2% on the previous year, including an increase
    in like-for like sales of 12.1%.
  • On the same basis, Homebase
    operating profit increased by 9.1%. The improvement from the reported figures
    is partly due to the timing of Easter and partly due to a particularly strong
    trading performance in the four weeks to 3 April 1999.
  • Like-for-like sales
    growth was strong throughout the year through pricing and promotional activity
    coupled with a strong advertising campaign.


  • Shaw’s performed well
    with like-for-like sales growth of 3.1%. Including the acquisition of Star
    Markets, reported sales and operating profits were $3,857 million and $129
    million representing improvements of 25.7% and 46.0% respectively.
  • The integration of Star
    Markets has been successful, contributing $7.6 million to operating profit
    before exceptional costs and amortisation of goodwill. Synergies in the year
    were $14 million, ahead of our initial expectations, and were realised from
    buying, distribution and back office support functions.

Sainsbury’s Bank

Sainsbury’s Bank reported
its first operating profit of £2.9 million for the year, an improvement
of £8.0 million on 1998/99. Turnover declined by 7.2%, affected by the
fall in interest rates during the year; however, there was a compensating reduction
in costs.

Cash flow

Operating cash flow generated
by the business remained strong at £838 million. After dividends, net
interest and tax, cash flow was £246 million. Payments for fixed assets
during the year amounted to £761 million being offset by proceeds from
the sale of fixed assets of £385 million including the sale and leaseback
of sixteen stores. Total payments for acquisitions were £293 million,
being primarily the Star Markets acquisition, resulting in net debt of £1,264
million as at 1 April 2000 with gearing of 27%.

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