JSAIY (JSAIY) Q2 2027 Earnings Report, Transcript and Summary

Good morning, everyone. Welcome to our interim results presentation. Thank you for joining us today. I will begin with the key highlights of the first half, specifically how we are delivering for customers and how that has translated through to the strength of the performance we have achieved. Bláthnaid will then take you through the financial performance and outlook before I come back to talk with a bit more detail on the progress we are making across Next Level Sainsbury’s. Before that, I want to start by saying a big thank you to every one of our colleagues and to all our farmers and suppliers for everything they have done to deliver for our customers through the first half. We all know just how challenging conditions have been across the food supply chain through the course of this summer with five record heat waves, particularly for our farmers and growers. That has extended to the pressures that the extreme weather placed on all our logistics and store colleagues. Many of our team working right across Sainsbury's went the extra mile to really deliver. A huge thank you to them. We have delivered another strong first half with continued grocery volume growth, market share gains, and profit growth. What sits behind that is something you have heard me talk about many times, our relentless focus on the things that matter most to customers, great value, outstanding quality, excellent availability, and leading service. On value in a really strong position, improving against most key competitors in the half. Operationally, we have delivered outstanding availability at the most challenged times in the summer heat waves with fresh food availability 2 percentage points higher than the other full-choice grocers. We continue to pull ahead of the rest of the market on quality with the strength of our innovation across Taste the Difference and Discovery. We are building momentum and differentiated capability using the strength of our balance sheet to invest in accelerating customer loyalty through personalized value, technology which improves the customer journey, and infrastructure and systems that deliver efficiency and resilience. Now the cost of living remains top of mind for customers, and we have continued to make very focused investment to ensure that we are razor-sharp on price across all the items in the basket that customers buy most often. With the biggest Aldi price match in the market, Nectar Prices on almost 11,000 products and personalized value through Your Nectar Prices, where customers have saved GBP 250 million since launch in 2021. This is delivering a consistency in our value position that has really stood out over the last six months. While we have strengthened value, we have kept investing in what has always set us apart, our trusted reputation and the association Sainsbury's as a brand has with customers for our food quality, range, and innovation. This year, we expect to launch more than 2,000 new and improved products, our biggest innovation program ever. This includes more than 700 Taste the Difference and Discovery products really stretching our lead versus the market. Innovation is not just about premium food. We are building on our leading position to make healthier choices easier by introducing new products, reformulating current ranges, and improving the visibility of nutritional benefits on packaging. We are seeing real momentum as we bring more of our food offer to more customers with fresh food sales up over 4% in the first half. We opened 14 convenience stores and two supermarkets, both of which were former Homebase stores, and we're really pleased with their performance. We've also invested in around 170 stores in the first half, focusing on those with the greatest potential. That investment is delivering, with these stores seeing stronger volume growth and customer satisfaction scores higher than the rest of the estate. To create greater fresh food capacity, we've been rationalizing General Merchandise range and space, making the space work much harder with volume per General Merchandise stocking point up 10%. Across all our supermarkets, we completed our biggest ever fresh food range reset, changing range and space allocations to reflect evolving shopping habits and improve availability and stocking efficiency. Sainsbury's has long had a reputation for strong relationships with farmers and suppliers, and we're building on that at a time when it matters more than ever. By the end of 2026, 60% of products in fresh produce, dairy, meat, fish, and poultry will be in long-term agreements. This goes way beyond the agreements that you will hear other retailers talk about. This is about our cost of production models, which give producers predictable profit margins, greater certainty, and the confidence to invest for the future. That strengthens the resilience of our supply chain and helps our suppliers deliver the consistent quality and availability of food our customers rely on. Why do the inputs across what we're doing on value, innovation, quality, and our relationships with suppliers matter so much? It's because they're delivering a winning formula that customers really trust. On value for money, I've talked before about how long it took for customer perceptions to catch up with the real change we've made in our value position following the investment we started with Food First back in 2021. That has now shifted. Customers consistently recognize the value they get at Sainsbury's, rating us ahead of our competitors. That reflects what we've delivered over time and the trust we've built. Importantly, we've strengthened our value position whilst maintaining the quality advantage that has always set Sainsbury's apart. You can see that really clearly here. Our quality scores remain significantly ahead of the other full-choice grocers, maintaining an advantage we've built over many years. It's the strength of that proposition that gives us the confidence to put more of it in front of more customers. In the stores where we've made the most significant investment, we've added an average of 1,500 new products per store. As part of our fresh food reset, we've given more space to key categories such as meat, fish, and poultry. At the same time, we're getting more from the space we retain in General Merchandise with higher trading intensity, lower working capital, and simplified operations. Toys is a good example. It was one of the first categories to go through the full range reset, and with fewer, better products, sales grew 13% in the first half. We're creating more space for our stronger food offer, while at the same time driving better productivity from the rest of the store. This is where it all comes together. We are right there with our customers day-in, day-out, ensuring we deliver on the things that matter most to them. At a time when the market has been a bit more volatile, we have maintained our lead and consistency on overall customer satisfaction, with more customers continuing to choose Sainsbury's for their big basket shop. This shows how our consistency has translated into performance, with strong volume growth relative to the market over a number of years. We knew we would be lapping some particularly tough comps through this period. While we continue to grow volumes, we dipped a little below the market in the second quarter. The comp will remain tough through quarter three, and we are expecting it to be another very competitive period, but we are really well set up for the second half. Our food proposition remains consistently strong across value, quality, and service, and we expect to deliver another winning Peak. Let me bring all of that together. We are really encouraged by our first half. We are continuing to invest in the things that matter most to customers, and we can see those choices delivering strong customer satisfaction and continued growth of big basket main shop customers. We are heading into Peak with a strong value position, outstanding quality, and our best-ever Christmas ranges, including 60 new Taste the Difference Discovery products. We are going to continue to make the right balanced choices that will deliver sustainable sales and profit growth. Our guidance today reflects that, with our central case employing continued profit growth in the second half. With that, let me hand over to Bláthnaid to take you through the financial performance and outlook. Bláthnaid Bergin: Good morning and thank you, Simon. I will now cover the financial highlights for the 28 weeks to 12th of September, 2026. Starting with a reminder of our financial framework. This lays out the factors that underpin our commitments to deliver profit leverage from sales growth, strong cash flows, higher return on capital employed, and enhanced shareholder returns. As we near the end of our three-year Next Level's strategy, we are pleased with our progress. We delivered continued food volume growth, higher profits, and strong cash flow generation. We are well on track with our plans to deliver GBP 1.6 billion of free cash flow over the three years to 2027. Together with the bank exit proceeds, we will have returned nearly GBP 2 billion to shareholders through dividends and buybacks. We are now going to look at the performance of our continuing operations, excluding Argos. As a reminder, we have entered into an agreement to sell Argos to Swift Partners. As a result, the performance and cash flow directly attributable to Argos has been represented as a discontinued operation. Underlying performance in this financial review refers to the group's continuing operations unless otherwise stated. Starting first with our sales performance. Grocery sales grew by 2.9%, reflecting continued volume growth and a lower level of inflation versus last year. Grocery growth was partially offset by a 3.4% decline in General Merchandise and Clothing. General Merchandise sales were down 5% year-on-year, in line with our expectations, reflecting our strategy of allocating more space to food and simplifying the range. Clothing sales were down by around 2% in a subdued and promotional market and against tough comparatives. Despite this, volumes performed ahead of the market, reflecting the strength of our offer and improved availability. In total, Sainsbury's sales grew by 2.6% in the half. Fuel sales were up substantially year-on-year, reflecting higher average wholesale prices and a modest volume decline. Together, this delivered total continuing operations sales growth of 4.5%. Looking at the shape of that by quarter, grocery growth was lower in Q2 than Q1, entirely as a result of lower inflation. Volume growth was broadly similar across both quarters, despite tough comparatives. Turning now to the sale of Argos. As announced in July, we have agreed the sale of Argos to Swift Partners, enabling us to fully focus on our core Food business. This transaction is expected to complete in February 2027, with full separation expected by February 2029. Additionally, in July, we handed back our banking license, the final bank colleagues exited, and we exited the last of the loan contracts. Together, these have created significant complexity in the accounting for the half, with the exit charges relating to the bank and moving Argos to discontinued operations. While the bank is now clear, the Argos exit costs will continue to move. The largest element will be the working capital true-up that we will need to complete at year-end. The numbers you are looking at today reflect the half-year position. They will be adjusted for both trading performance and the working capital true-up as we finalize the sale and exit in February. While we have treated Argos as discontinued, given the fact that it is heavily integrated into Sainsbury's, this has driven a review of the Sainsbury's assets and resulted in some impairments in continuing operations. I will cover those in the next few slides. This table shows the breakdown of Argos discontinued operations numbers. Before I talk about some of the bigger numbers, you can see that Argos made a loss of GBP 8 million in the first half, slightly higher year-on-year. This was in line with our expectations, and we continue to expect Argos full year operation profit to be in line or ahead of last year. We have recognized a non-cash impairment loss of GBP 215 million on the disposal of Argos, and we have also booked a provision of GBP 102 million in relation to separation costs, largely tech-driven. There will be further separation costs to be recognized as we finalize the exit. Separately, we recognized GBP 37 million of restructuring and impairment costs in line with our Save and Invest program. Turning now to profits from continuing operations. Last year, we reported total underlying operation profit of GBP 506 million. Excluding the Argos discontinued operating loss and taking into account perimeter adjustments, this creates a continuing underlying operation profit base of GBP 507 million. Versus this GBP 507 million base, underlying operation profit increased by 3.6% to GBP 525 million, reflecting volume growth, balanced investment in the customer offer, and continued cost-saving delivery. Underlying finance costs were flat year-on-year, and as a result, underlying profit increased by 5.2%. We expect continuing operations underlying net finance costs to be around GBP 300 million-GBP 310 million in 2026/2027 versus our previous guidance of around GBP 320 million. Underlying earnings per share increased by 10.4%, reflecting a lower underlying tax rate year-on-year and a reduced share count as a result of the cumulative effect of share buybacks. This slide sets out items excluded from underlying results on a continuing operations basis. We incurred GBP 60 million of non-underlying costs during the half. The largest item was GBP 87 million of divestment costs. This primarily relates to non-cash impairment of non-trading sites and Sainsbury's stores following the announced disposal of Argos operations, as well as fees associated with the disposal. It also includes GBP 8 million of final bank exit costs. Retail restructuring program credits in the period primarily reflect gains from lease exits and the renegotiation of dilapidation provisions recognized in prior periods, partly offset by the redundancy and property strip out costs associated with bakery closures. Now turning to our cash flow metrics. Free cash flow increased by GBP 57 million year-on-year. There are three elements to this. Firstly, the working capital of GBP 67 million is largely driven by payment timings. We continue to deliver on our working capital program. Secondly, capital expenditure was GBP 71 million lower year-on-year in the first half, primarily driven by timing of spend. Finally, profits are higher year-on-year. Net debt will be covered on the following slide. This table shows the key elements of our cash flow and movements in net debt this year and last. Following the change in the Financial Services business model, net debt and associated cash flows from Financial Services are now included in the core net debt measure. Opening retail net debt has been adjusted accordingly, as shown on the table. Comparatives have not been restated given the prospective nature of the change in the Financial Services operations. Before the impact of this change, net debt, including lease liabilities, increased by GBP 221 million, primarily reflecting shareholder returns comprising of GBP 213 million of dividends and GBP 200 million of the GBP 300 million share buyback program, returning bank disposal proceeds received in the prior year. Free cash flow of GBP 333 million was partly offset by divestment cash costs, including the wind down of previously provided bank exit costs not directly attributable to portfolio sales and advisor fees associated with the disposal of Argos operations. Current year discontinued operation cash flow represent trading cash inflows of Argos operations and cash outflows to settle owners' contracts previously provided for by the bank portfolio sales. We continue to expect to generate free cash flow of more than GBP 500 million in 2026/2027, consistent with our commitment to generate at least GBP 1.6 billion over the three years to 2027. Continuing cash capital expenditure is expected to be between GBP 750 million and GBP 800 million in 2026/2027 versus our previous guidance of GBP 800 million-GBP 850 million, with the reduction reflecting the movement of Argos to discontinued operations. Here we lay out our balance sheet metrics. Net debt to EBITDA is broadly unchanged year-on-year at 2.6x and within our target range of 2.4x-3x. Return-on-capital employed improved by 20 basis points year-on-year to 9.2%. Turning to shareholder returns, as previously announced, we intend to complete a GBP 300 million share buyback program this year, comprising a core of GBP 200 million and an additional GBP 100 million returning bank disposal proceeds. The GBP 200 million core share buyback was completed in the first half, with the remaining GBP 100 million expected to complete in the second half. We are proposing an interim dividend of GBP 0.41per share, representing 30% of last year's full-year dividend, consistent with our standard policy. In total, we expect to return more than GBP 600 million of cash to shareholders this year. In summary, we are pleased with our performance in the half. We delivered profit growth against continued tough comparatives in a competitive market, generated strong free cash flow, and are delivering strong cash returns to shareholders. We also announced the sale of Argos, which will allow us to focus our resources on our core Food business. Looking ahead to the full year and the guidance we have issued to the market this morning, I thought it would be useful to clarify what exactly this represents and how it compares to our previous guidance. Our previous guidance was underlying operation profit of GBP 975 million-GBP 1,075 million, including Argos. Last year, Argos contributed GBP 9 million of operation profit, and we said that we expected profits to be broadly unchanged year-on-year. On a continuing operations basis, if we exclude that GBP 9 million from the previous guidance and round down by GBP 1 million, that will be the equivalent to GBP 965 million-GBP 1,065 million. Versus that range, we now expect underlying operation profit from continuing operations of between GBP 1,025 million and GBP 1,065 million. I know plenty of you will ask about the Financial Services contribution. Financial Services contributed around GBP 3 million to operation profit growth in the first half. For the full year, we expect a contribution to continuing operations profit growth of around GBP 10 million versus the previously guided GBP 20 million. This reflects the Financial Services contribution that now sits with Argos in discontinued operations. For next year, we talked about GBP 40 million of incremental income, and we still expect to deliver at least half of that upside on a Sainsbury's-only basis. Roughly another GBP 10 million of incremental income from Financial Services next year. We won't separately disclose Financial Services income, and we will only make a comment when it has made a significant impact on growth in any period. As a reminder for future years, when we announced the divestment of Argos, we guided that the impact on underlying operation profit was broadly neutral, with loss to Argos operation profit and to synergies offset by Argos store and store rental income and Nectar income. This included the change to our Financial Services contribution expectation, so no further adjustment is required. We remain focused on maintaining our strong competitive position, delivering strong cash generation of more than GBP 500 million, and creating consistent value for shareholders. Thank you for your time. I will now hand back to Simon.

Thank you, Bláthnaid. Let me now take you through the progress we're making across our Next Level Sainsbury’s strategy. When we launched Next Level Sainsbury’s in February 2024, we set a clear purpose and four strategic outcomes. We're now in the final year of the plan, and we continue to make sustained progress. As we announced in July, the planned sale of Argos is an important evolution. It will create a simpler, more focused Sainsbury's while enabling Argos to continue its transformation under dedicated ownership. I'll come back to Argos shortly, but let me start with First Choice for Food. Our ambition here has been consistent right back to when we launched Food First in 2021. We want many more people to choose Sainsbury's as the place they come to for good food. On value, what's distinctive is how the different elements work together. We have the biggest Aldi price match in the market and Nectar Prices on almost 11,000 products. Increasingly, we are combining that broad-based value with personalized offers through Your Nectar Prices. Together, that is delivering really meaningful value for customers, saving GBP 16 on average on a big trolley shop, and consistent trusted prices on the items customers buy most often. While customers have the reassurance of trusting us on value, they know they do not need to compromise on quality. As ever, it is the quality of our food that really sets us apart. Taste the Difference sales have increased nearly 50% over the last four years, and on that strong base, we are still seeing growth ahead of the market again this year. With continued investment in fantastic innovation and quality, we see huge further opportunity here, and our biggest program of Taste the Difference innovation is coming for this Christmas. Taste the Difference Discovery, our range of restaurant-quality meal solutions and premium specialty products, is building on that strength and opening up new territory for customers seeking the most exciting innovation in food. We have doubled the range this year, and it is now contributing around a quarter of Taste the Difference growth. Our product development teams working alongside our suppliers are doing a brilliant job expanding discovery into new categories, including barbecue, Italian meals, and premium meat, fish, and poultry choices like Norfolk Black Chicken. We expect the range to exceed 200 products by the end of the year. We want our customers to be able to access the best of our food offer however they choose to shop with us. We are encouraged by the growth we have continued to have across all channels, not just through supermarkets, but also convenience and Groceries Online. Online performed particularly strongly, with sales up 9%, reflecting improved overall customer satisfaction, including the friendliness of our drivers, quality, range, and availability. As you know, we were early into the rapid-delivery grocery market, both with our own OnDemand proposition, Chop Chop, and then we moved into partnership with Deliveroo, Uber Eats, and Just Eat through 2025. We have largely completed our rollout of OnDemand, now in more than 1,400 of our supermarkets and convenience stores. Alongside expanding our digital offer, we are making shopping at Sainsbury's easier and more seamless, creating a more joined-up experience both online and in store. We have brought SmartShop, OnDemand, and Groceries Online together in our enhanced Sainsbury's app. We are also adding new features to take the effort out of shopping. Search your store helps customers quickly find products, while AI-powered SmartLists turn a photo or even a meal idea into a shopping list, helping customers plan, find what they need, and keep track of their budget. In Tu, the work we have been doing to strengthen the customer offer is continuing to deliver. We have been focused on developing our ranges and style credentials alongside driving better availability through a step up in operational performance. We are seeing the benefit of that focus. Customer perceptions of style are up, availability is stronger, and Tu has outperformed the wider clothing market. We also delivered our best ever back-to-school performance, with sales up 8%. This is being supported by the rollout of RFID across clothing, giving us better stock accuracy and helping drive availability and operational efficiency. While the overall clothing market remains subdued, we are making good progress on the things that will strengthen the Tu offer for the longer term. Turning next to Loyalty Everyone Loves, Nectar continues to be a really important part of how we deliver value for customers and deepen their relationship and connection with Sainsbury's. We are continuing to make Nectar more personalized and more rewarding while giving customers more ways to earn and benefit through our growing coalition of partners. At the same time, we are investing in the data Retail Media capabilities that continue to strengthen the long-term growth opportunity for Nectar360. What is really powerful is how those two sides increasingly work together. For customers, it is about delivering great value through Nectar Prices, points, and increasingly personalized rewards, alongside more ways to earn and redeem points through our coalition partners. For suppliers, Nectar360 brings together our customer insight, targeting, Retail Media capabilities to help brands connect with customers in more relevant, measurable, and higher-returning ways. That is driving deeper digital engagement. Nectar participation continues to grow, with digital Nectar users up 9%. 17% more customers are accessing personalized offers on their favorite products each week through Your Nectar Prices. We know that this engagement drives a real difference in loyalty. Increasingly, personalization can help customers discover different parts of our range, whether that is making healthier choices or introducing more customers to Taste the Difference. Nectar360 continues to be at the forefront Retail Media in the U.K., fueled by innovation and the strength of customer engagement with Nectar. Pollen is the most Retail Media platform in the U.K. We launched this proprietary platform at the end of last year, and we are now rolling it out across a wider client base. It is revolutionizing the way that brands and agencies work with Nectar to run Retail Media campaigns at scale. Pollen has now delivered more than 600 campaigns for around 100 clients. Nectar360 has also become the first U.K. retail and media business to be accredited and independently audited against the IAB Europe Commerce Media Measurement Standards. This provides a unique guarantee of credibility on the way that Nectar360 delivers and measures return on investment. Alongside Pollen, we are continuing to expand our in-store media network with more than 3,500 digital screens today and close to 5,000 expected by the end of the year. This slide brings to life what that capability can deliver for brands. Brands are able to connect with customers across in-store, on-site, and off-site channels and measure the impact. This Diet Coke and The Devil Wears Prada campaign is a great example, reaching 8 million customers and delivering a 3.7 times incremental return on advertising spend. Let me now turn to Argos. As we announced in July, we have agreed the sale of Argos to Swift Partners completing February 2027. This is the right next step for both businesses, creating a simpler, more focused Sainsbury's while giving Argos greater flexibility to accelerate its transformation under dedicated ownership. The team continues to make good progress in delivering the transformation plan with investment in people, stores, and technology, an encouraging marketplace launch, and strong new customer take-up of the new credit proposition. And perhaps most importantly, it's business as usual at Argos, and we expect full-year trading profits to be in line with or ahead of last year. So our focus is on continuing that progress and securing a stronger future for Argos as we move towards completion of the transaction. Save and Invest to Win is about investing in technology and infrastructure to deliver sustainable structural efficiency gains. We're creating a simpler, more automated, and more productive business while continuing to invest in the capabilities that will make Sainsbury's stronger for the future. We're on track to deliver our GBP 1 billion cost-saving target, taking total savings to GBP 2.3 billion over the past six years. Our focus has moved away from individual one-off saving initiatives towards end-to-end improvements in processes and ways of working that change the game in terms of costs. These will deliver savings well beyond the current year. Investment in technology is improving productivity and delivering benefits for customers. Our stores are becoming more connected from the shelf edge through to customer scanning. AI is making a very real difference to in-store productivity and safety and loss prevention, whilst improving customer satisfaction and availability. We've made good progress rolling out facial recognition technology following a successful trial, which saw logged incidents fall by 46% and more than 90% of identified offenders not returning to our stores. Self-checkout video analytics are now in nearly 600 stores, with continued rollout across supermarkets and introduction into our convenience stores, driving significant reductions in mis-scanned items. SmartShop is now in all supermarkets, with 20% more handsets year-on-year, supporting operational capacity and bigger basket shops ahead of Peak. We've rolled out our optimized reduction algorithm to all stores, reducing waste and improving colleague efficiency. This has already delivered a double-digit million-pound saving. Before I close, let me come back to the commitments we made when we launched Next Level Sainsbury’s. We're now in the final year of the plan, and we continue to make good progress against those commitments. We've built on really strong foundations to sustain a very strong competitive position, consistently investing in our customer offer. We've grown food volume ahead of the market, and we expect to have grown profit faster than sales and improve ROCE, supported by our cost-saving program. We've generated strong free cash flow whilst investing in our stores and in the long-term strength and resilience of the business. We expect to hit our target of more than GBP 1.6 billion of free cash flow over the three years of the plan. And we couldn't do any of this sustainably without keeping a strong focus on outcomes for customers and colleagues and our key plan for better outcomes. We'll give a full update on performance against all the metrics at the end of the year. And that brings us back to our key message today. We're delivering for all our stakeholders, building a stronger, simpler, more focused Sainsbury's with the capabilities that matter for today and tomorrow. Our winning combination of value, quality, and service is consistently delivering for our customers. We have a strong and trusted value position and leading quality and innovation building on the core strengths of the Sainsbury's brand. We're deepening loyalty through Nectar and Retail Media income whilst investing in technology, productivity, and efficiency. This is generating strong, sustainable returns for our shareholders. Thank you for listening, and thank you for joining us this morning. Bláthnaid and I will now take your questions.

Hello, and welcome to the Sainsbury's 2026/2027 interim results announcement analyst Q&A call. On the call this morning is Simon Roberts, Chief Executive, and Bláthnaid Bergin, Chief Financial Officer. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Once your name has been announced, you can ask a question. If you want to withdraw your question, please lower your hand using the raise hand function. Thank you, and a moment for the first question, please. Our first question comes from Manjari Dhar with RBC Capital Markets. Please unmute your line and ask your question.

Morning, Manjari.

Morning, Simon. Bláthnaid Bergin: Morning.

Morning, Simon. Morning, Bláthnaid. Thank you for taking my questions. I just had three, if I may. My first question is on how you view the consumer outlook as we sit now versus when you originally set your guidance, the original guidance. My second question was just on how you view the competitive backdrop evolving in some of those faster-growing segments that you mentioned Online, OnDemand, the premium market. Finally, also on Online and OnDemand, I guess, how do you look at the capacity that you have for growth now and the ongoing opportunity there? Thank you.

Thanks, Manjari. Okay, well, let me take each of those in turn. Look, I think on the consumer outlook on where customers are at, you can see in our results today, we've been super focused on the value, quality, and service proposition are absolutely the heart of the Sainsbury's food offer, and that's really working with our customers. Obviously, customers continue to be concerned about the cost of living, and so having that consistent, trusted value is making a real difference in the fact that we continue to win more big trolley shoppers in the first half of this year. I think, as you've seen over a number of years now, that's the absolute foundation of everything we've been doing at Put Food First, and that's really working. That will continue to be really important. Look, I think as we look out over the rest of the year, obviously, customers are waiting for the budget next week. Almost, I think they've been sort of trained to kind of be more cautious around that over the last few years, and I think good news, it's happening earlier this year and we don't have to wait till November. I think we look forward to the third quarter with the focus on cost of living being front and center, providing great value. Then obviously as we get towards Christmas, there's signs already customers are starting to look to Christmas. Food ordering is up. Interesting Groceries Online slots that went live last week, we've got more of those. Big focus on innovation and new products in the food offer. I think, customers looking for reasons to be assured on both value and quality that they can get what they want every week. In terms of how we think about the kind of competitive backdrop. Look, I think, you can see in the recent market reads that there's not a lot of volume in the market at the moment. It's being really clearly competed hard for, and everyone's working hard for the volume that they can get. I think that reflects our first half of the year, there's been quite a lot of noise in the sort of comparatives. Obviously, there's some extreme weather impacts this year, the impact of the prolonged cyber on last year's comps, changes in how customers have shopped, particularly the warmer weather meant that customers shopped more frequently, but often with smaller baskets. That is going to play through into a lower level of volume in the market. I think, obviously, that means that everyone is working hard to secure volume. Within that, look, you can see what we are doing. We have continued to really deliver that combination of value, quality, and service. Specific to your point on the channel shifts, I think really clearly, online growth at 9% in the half, we are really encouraged by that. We have been working hard over a period of time to build our capacity and also our service proposition and actually our customer satisfaction. We did not show it in the slides there, but our customer sat moved back in front in the period as well as we continue to really make sure we are delivering for customers online. In terms of what is happening in there, you talked about some of the segments, so obviously, OnDemand, the fastest-growing segment. We obviously went into that market last year, so we have largely completed our rollout, getting into pretty much all of our supermarkets and convenience stores in the way we have rolled that through. I think as we look at that going forward, we delivered in the first half of this year 27% growth in OnDemand. Actually, interestingly, what we saw is that our total volume of grocery performance was a little bit up in Q2 compared to Q1. But obviously, as we lap the rollout of OnDemand last year, actually we had stronger growth in OnDemand in Q1 than Q2. So we are actually pretty encouraged our supermarket volume moved up a little bit in the second quarter. But obviously, we are lapping the rollout last year. Others are coming into that channel now, OnDemand overall strong. You mentioned premium. Look, I think it is absolutely at the cornerstone of our food-focused plan, which is customers want great value, but they also want great quality, and they want exciting new food ideas. The innovation team, working with our suppliers, has done a fantastic job at the premium level, 2,000 new products this year. Big focus on Taste the Difference, our biggest innovation program ever for this Christmas. So a lot happening across how customers are shopping, the kind of products they want. I think what we can see in that is our formula, our winning formula continues to make sure we can take a better share, we can win big trolley shoppers, and customers get assurance in the Sainsbury's offer.

Okay, sir. Thank you.

Thanks, Manjari.

Thank you. Our next question comes from Matthew Clements with Barclays. Please unmute your line and ask your question.

Matthew, good morning. Bláthnaid Bergin: Morning, Matthew.

Matthew, your line is unmuted. Matthew, please unmute your line and ask your question. We will circle back to Matthew in a moment. We will now move on to—

Let's just check Matthew. Can just see whether Matthew can get through before we move on. Matthew, can you hear us? Matthew, we will come right back to you. Okay.

Yes, Matthew. We will move on to Rob Joyce with BNP Paribas. Please unmute your line and ask your question.

Rob, morning.

Hi. Hopefully. Morning.

How are you, Rob? Loud and clear. Bláthnaid Bergin: Morning.

Excellent. I will go with three as well. First one, I guess, stands out as the relative slowdown in performance versus the market. I guess the other thing that stood out was the closing the gap of your overall customer satisfaction versus the other three grocers. They all seem to have caught up quite a lot in the recent quarter. Given that wasn't value or quality, can you tell us what sort of driven them to catch up there? Do we think this sort of relative gap is going to stay closed versus competitors for the foreseeable? Second one, on the quite a lot of press reports about your discussions with Morrisons that seem to have been quite extended. Should we consider that as potentially suggesting that the kind of Food First strategy is coming to an end? The upside from that you have maybe taken, harvested most of that. The final one would just be on the overall competitive dynamic of the market. I mean, interesting to see Aldi there improving for the first time in quite a while. Are you seeing a step up in particular from that element of the discounter space? Thank you.

All right, Rob. Super clear. Thank you. Three questions. Let me start first of all on your question on the quarter. Look, I think we're actually really encouraged about our performance in the first half of this year and the fact that we've continued to win share, particularly of large trolley shoppers. That's been really fundamental in terms of the strength of our proposition. I would just point out that we've just lapped some of the biggest comps we've seen in any of our plans so far. This time last year, grocery growth was 5.9%, and as we move into this quarter, a strong comp too. Actually, we come through the second quarter when there hasn't been a lot of volume in the market, and it's been pretty hard competed for, actually pretty encouraged by the fact that we grew a bit of share there, and we've continued to grow volume. I think what we can see in the market is there's a bit more promotion out there's a bit more incentive out there. Actually what we've continued to do is to deliver our plan and make sure we're giving customers that combination of quality, value, and service that they really come to expect from us. As we come into the third quarter, you can see in the market reads, volume is subdued in the market at the moment. In that context, we're making sure that we're absolutely delivering for customers what they expect from us. We've had continued very strong performance, and we continue to make sure that the proposition is very strong. You can see that coming through in the fact we're growing in all channels. In the key parts of the grocery shop, our value is as strong as it's ever been. In terms of your point on value, I'll just come to that next before your middle question. Look, I think as you can see, we've got some of the strongest value we've ever seen. Obviously, through the summer, as customers shop differently, different competitors have responded to that. All the way through, our consistency has continued to be really strong. Actually, we improved against most of the market. We continue to see positive switching from a number of our competitors. You'll know when you think back over a number of years now how much our value position has really stepped forward. Specifically on the discounters that you reference, how much our value position has really stepped up compared to where we were before. Net-net, what would I draw out of that? Volume is more challenged in the market. You can see that. I can see that. Everyone's working very hard to get what they can. There's a bit more incentive, promotion, vouchering out there at the moment. We continue to deliver our plan, and we've taken a bit of share in the half. Actually, as I said, volume gains were a bit better in Q2 than they were in Q1. On your middle question, look, I'm not going to, and you wouldn't expect me to, comment at all on the speculation in the media. What I am just going to absolutely reinforce is the point I started with on the call, which is, as a team, we are completely focused on our plan to continue to put food right at the heart of Sainsbury's. You have seen in our Food First strategy we launched in 2020. You can see in Next Level with a few months of this plan to go how much year-on-year improvement in our performance we have been able to deliver. We have pretty much six years now have sustained outperformance. We have continued to win more customers. Everything we are about, not least given the announcement we made with Argos in the summer, is continuing to double down on the opportunity, the very significant opportunity we see to continue to strengthen our Food business. That is everything that the team and I are about.

Okay. Thank you, Simon. I guess just to round out, do you still think you can grow profits in this kind of challenged volume environment?

Look, you have seen in our report this morning, in our update this morning, we have obviously lifted the lower end of our guidance range. We have obviously delivered an improvement in our profitability in the first half. The central point of our guidance points to increasing profit in the second half. We continue to deliver all of the benefits for customers we committed to but continue to grow our profits as we do that. So, we have got a very clear plan for the second half. We are very focused on delivering it. Our guidance today, I think, gives you a clear message that at the central point of our range, we expect to grow profits 2% in the second half, the range GBP 1,025-GBP 1,065. Let us see how Christmas plays out, but we are definitely coming into this period with a very clear plan. I would just make the point as well, our cost savings program, GBP 1 billion over three years, when we complete Next Level, GBP 2.3 billion over six years. Teams right across the business are doing a fantastic job to really drive through that cost saving work because it is so important both to make sure we can invest in the offer, but also to underpin the improvement in our profitability that we have committed to today.

Thank you.

Thanks, Rob.

Thank you. Our next question comes from Matthew Clements with Barclays. Please unmute your line and ask your question.

Matthew, can you hear us okay?

Hi, folks. Hope you can hear me now. Apologies for that.

Loud and clear, Matthew.

Yeah, I can. Sorry. The muting and unmuting is out of our control on the side, obviously messed too much with the system. I will keep it to one because I have wasted everyone's time already. Nectar participations continue to grow, but you do not explicitly call out Nectar as a profit growth driver in the first half. If we assume that cost saving broadly offsets cost inflation, is Nectar one of the key explanations for the delta between profit and sales growth? Then perhaps how important was Nectar, be it to full price or finest in grocery? Thank you.

Matthew, thanks. Well, look, I think just to pull up on a couple of the key numbers we have talked about in the half on Nectar. So I mean, really importantly, we talk about Nectar as a big acquisition engine to bring more customers into Sainsbury's and to give them the confidence to get great value. As you saw, we have had a 9% increase in the number of customers digitally using Nectar. That is significant in the first half of the year, given the high bar we started the year with, and 17% more customers now using Your Nectar Prices. So I think that really shows how fundamental Nectar now is in really driving the total value proposition, but also giving more customers reasons to shop with us. Our participation levels now, across our supermarkets and Groceries Online channel are moving into the highest level of performance that we could have expected, well towards 90% overall. I think the way we think about this, as you know, is that we want to give customers reasons to shop in Sainsbury's, and that's why acquisition of customers into Nectar is such a key part of our Next Level Sainsbury’s strategy. Then obviously, as we do that, two things happen. First of all, customers get the value at Sainsbury's. They also get to benefit from all the coalition partners that we work with. Then that clearly turns into our ability to drive Nectar360. So you'll be familiar that we committed over the course of this three-year plan to deliver GBP 100 million incremental through the Nectar360 plan, and we're well on track to do that. Obviously, a few months of the plan to complete. You can see in our announcement today just the momentum in Nectar overall, and Mark and the team are leading in a fundamental change to make sure this is absolutely leading the way Retail Media in the U.K. And you can see in the new functionality we've got with Pollen, the amount of activity that's now running through Retail Media platform, how important that is in underpinning that additional profit delivery. Look, I think to your question, the heart of your question, what does Nectar do? It gives customers even more confidence to shop with Sainsbury's. More customers are doing that. That's helping drive our volume. That's helping drive our ability to drive trade up. You saw in the video back there, one of the things more and more as we learn about customers, we can personalize how we talk with them and help give them suggestions and ideas and recommendations. For example, to help eat more healthily or our Taste the Difference ranges. So more and more, it's helping in the mix in terms of what customers choose, and then we're converting that, as I say, through Nectar360. So, we're really encouraged with the progress right across Loyalty Everyone Loves. And obviously, as we look ahead, Nectar and Retail Media leadership in the U.K. is one of the things that's really underpinning our confidence as we look ahead.

Okay. Thank you. Thanks for your patience.

Thanks, Matthew.

Thank you. Our next question comes from Benjamin Yokyong-Zoega with Deutsche Bank. Please unmute your line and ask your question.

Benjamin, good morning. Bláthnaid Bergin: Benjamin.

Morning. Just two, if possible. Firstly, on the markets, growth has softened. We are seeing promotions run ahead of full price sales. Have you seen any meaningful shifts in customer behavior, maybe in Q2 compared to Q1? How are you thinking about balancing volume growth and share gains against potential margin dilution from further price investments as we move through the year? Secondly, I guess to go back to those higher margin profit streams, it is great to see profits robust despite the softer sales. Can you comment in a bit more detail on the contribution from OnDemand and Retail Media in the half? I assume these are key profit drivers.

Ben, okay. Shall I take the first question, maybe Bláthnaid on the second one in terms of how we think about the other streams. Look, I think, not to repeat, Ben, just to recap, I guess, in terms of customer behavior, look, I think what did we see in quarter two? We saw a lot going on for the customer, not least driven by some of the weather impacts we saw through the summer. I think, five heat waves, people out a bit less. They shopped more frequently with smaller baskets. As I said, we had the annualization of some of the cyber impacts last year. Then obviously we have just had a real focus in customers on the cost of living. I think all of those things together have contributed to not a lot of volume in the market at the moment, as I said earlier, and that volume being competed hard for, which has seen promotions running a bit up, and more general incentives and coupon activity in the market. The way we think about this is, as I said earlier, we have got a very clear and strong proposition, which customers continue to respond well to. We are obviously pleased to be raising the lower end of our guidance today and pointing at the midpoint of our new guidance to our profit commitment for the second half of the year. Obviously, in setting that range, that tighter range, we continue to make balanced choices to make sure that as we enter this second half of the year, we can do exactly what we need to do, both in delivering for customers and to make sure that we get the right balanced choices across the business. Look, obviously, you would not expect us to do any activity that will not deliver the right level of performance. We are very focused on getting things right for customers, making the right balanced choices, and making sure that we have got the right plan as we come into the second half of the year in what is a more subdued volume set of conditions there to deliver the best outcome that we can. Bláthnaid Bergin: Great. Look, we see Nectar and Food OnDemand very much just as part of our business. It is business as usual for us. Simon talked about the incremental GBP 100 million from Nectar. That is well on track to deliver this year. There is always a balanced choice on how much we drop through to the bottom line versus how much we invest to drive our proposition. We make those choices as we travel through the year. Food OnDemand, we got out of the blocks early on that last year. We are really pleased with its performance last year. Of course, others are coming into the market now, so we are seeing a little bit of a slowdown. But I have to say, it grew by 27% in H1, so we are pleased with the Food OnDemand performance as well.

Understood. Thank you very much.

Thank you. Our next question comes from Izabel Dobreva with Morgan Stanley. Please unmute your line and ask your question.

Izabel, good morning.

Hello. Good morning. Thank you for taking my questions. My first one is around the phasing of your price investments across the year. We have seen a big improvement in your value credentials over the first half. I am wondering to what extent did your expectation for the food inflation evolution over the course of the year impact the phasing? Was there a case of frontloading as perhaps you expected higher input cost headwinds in the second half? My second question, just following up on the rapid grocery market. What, in your view, is the best action plan to defend market share from here, given the entry of some competitors in the space who have their own market share ambitions? Is your expectation that their entry may actually enlarge the market, meaning that you can still sustain a high level of growth? And then my final question on Nectar360. Could you talk us through how you are adapting the proposition for agentic commerce?

Excellent. Okay, let's take each of those in turn. So in terms of your first question, we've delivered our plan in the first half, Izabel, exactly as we planned. So when we look at our relative price position, obviously that's a function both of what we've done, but also what others have done. When we think about the environment overall, we come to the end of the first half of the year in a very strong value position. We've constantly obviously made sure we look week to week to make sure our competitiveness is where it needs to be. But just to be really clear, we've not made any different choices to we planned. To your point, what is different is that inflation is at a lower level than I think most of the forecasters imagined at the beginning of the year. We never made a specific view on where inflation would get to, but obviously inflation is running lower than most forecasters thought. For us, around 2%. I think as we come into this period, we're not seeing a lot of move at the moment, as you'll know. I think when we look at the food categories, I think a couple of things going on there. I think it's clear, obviously, in some of the branded categories where it's more dominant suppliers there, very focused on maintaining volume. Whereas in fresh categories, I think the pressure is building for obvious reasons. When we think about fertilizer and energy and the other inputs into fresh food. So I think in fresh food, a bit of pressure is building now, which I think will feed through in time, and obviously what we'll continue to do is balance the right value position for our customers and getting inflation through to the shelf where we need to. I think it's hard to be clear the timing of that, what exactly play out. As I say, so far in the quarter, there's not been too much where the hedging rolls over. I think the pressure on fresh food categories will build. In terms of the rapid grocery market, look, I think just to recap there, obviously we were really pleased to take advantage of the move we made last year. We talked to you at the time about the growth that gave us in our performance. Actually, as I said earlier on in the call, we've come through the first half of the year. Others, not surprisingly, have moved into the market. It's the fastest growing channel. To operate in this market, it's not surprising everyone wants to be there. Actually, what we're finding is we wouldn't expect there to be a lot of growth coming from that into the third quarter because we've taken the growth that's there. But we're finding lots of opportunities to improve the operational performance, think about how the efficiency of the operation works, and I think once you've taken a big scale capacity on, that shouldn't be underestimated in terms of how we improve operationally and from a profitability point of view, how we continue to drive that. I think, look, OnDemand is clearly going to be a very important part of the way consumers shop. That's why businesses like ours are really thinking about and starting to put in place all of the propositional and operational requirements we need to be right there for customers however they want to shop. We've seen online grocery overall grow by 9%. But I'd also make the point that as we think about OnDemand, it's 3% of our total grocery sales today. So it's given a lot of growth, but by far and away, the biggest channel is still physical shopping. I think, as we look ahead, we'll see growth in OnDemand. And obviously everyone will cycle through their first year of building capacity. We continue to be really confident in our overall proposition. As I say, we grew volume a bit in our core supermarkets in the second quarter, even though we were lapping a very big period of OnDemand last year. On Nectar360, and Bláthnaid might also want to come in on this as well. I think, look, we continue to be really focused on the strength of Nectar360. As I described earlier, the capabilities that we're building in Nectar360, the capabilities for brands and clients to build their own campaigns, the capabilities to be able to convert the customer participation into really strong campaigns and returns is all coming through well. And obviously we're looking ahead, aren't we, Bláthnaid, to make sure that we are also in a really strong place as customers shop differently, however agentic commerce develops. Bláthnaid Bergin: One of the things we're quite focused on at the moment is how do we improve our discoverability, how do we improve our customer experience. So we're really watching the trends, what's emerging, and how do we stay aligned with those and move at the pace that the market's moving at and our customers are moving at on that.

Thank you, Izabel. I hope we've answered all your questions there. Thank you.

Thank you. Our next question comes from Xavier Le Mené with Bank of America Merrill Lynch. Please unmute your line and ask your question.

Xavier, good morning. Bláthnaid Bergin: Good morning.

We can't hear Xavier.

Xavier, please unmute your line and ask your question.

Let's just try.

Xavier?

See whether we can make this work. Xavier Le Mené: Oh, yes, sorry. Working now.

We can hear you. Great. Xavier Le Mené: Okay, good. Okay. It's not like it was. Thank you for taking my question. First one, if you look at the underlying operating profits, which grew by 3.6%, and your top line growth excluding fuel, slower than that, can you help us to think about the operating leverage that you had in H1 and what we should expect in H2? Especially, can you help us to understand the cost bridge from here, labor cost, energy cost, and how are you hedging the cost going forward because potentially that's where some inflation should start to rise going forward. That will be the first question. Second one, just on the operating profit to the H1, so the GBP 525 million, what would need actually to go wrong in H2 to land at the bottom of your guidance? Just to understand a bit of that. The last point is more on transferring non-food space into food. Can you help us to understand the kind of return on invested capital you've got there? What it means in terms of sale density, but also in terms of margin.

Xavier, thank you. Bláthnaid, do you want to take the first two? Bláthnaid Bergin: Why don't I start with the first two. If you look at the middle of our guidance range, and you look at where we plan to land for the year-end, we will deliver profit leverage over the life of the plan. We're pretty pleased with that outcome. Subject to everything going our way, which is a great second question on that. What would need to be true to land at the bottom of the range? Look at volume and what happens in the budget next week, and consumer sentiment. But we are fully locked and loaded for Christmas. We're going to serve up a great Christmas to our customers. We are ready to go on that. What is coming through, if we stand back and look at the costs in particular, if we look at the hedging, we hedge about 12-18 months out in advance. We're pretty locked and loaded for this year and the first half of next year. Let's see where energy prices move in the market. But we may see some of those costs coming through into the COGS from our suppliers as well as Simon talked about earlier on that. Do you want to take the—

Yeah, no, thanks. On the space questions, Xavier, maybe just a half step back in terms of what we've been implementing through Next Level Sainsbury’s. You'll remember two key streams of strategic drive here. One was to make sure that we repurpose, to your question, more of the space in our supermarkets to food. Specifically, we've been continuing to drive that program forward. We actually made investments in the first half of this year overall at about 170 stores, supermarkets and convenience stores. In supermarkets, we've been increasingly reducing the space to General Merchandise and correspondingly increasing it to food and particularly fresh food. We added significant space to food in the half. Importantly, the General Merchandise change, just to give you a couple of points to emphasize that. We've been able to improve the sales per stocking point up 6% in General Merchandise. We've been able to make substantial labor reduction costs and also improve our working capital, through reducing the stock holding in GM. Improved trading intensity in GM, improved assortment and operating cost benefits in food as we continue to drive that program in terms of our supermarket space. Separate to that, as you know, we continue to selectively open new stores, and we continue to open new space in areas of the U.K. where we're very confident we can get a good return. Actually, some of the stores that we've opened now, which are now coming through their second year, are getting good double-digit progress in performance. We're seeing in the stores, we've added more space to food, both improvements in volume compared to the overall business and also in customer satisfaction as well. In summary, the space move in more for more, is really delivering as we expected. Thank you, Xavier.

Thank you. Our next question comes from Elizabeth Moore with Citi. Please unmute your line and ask your question.

Hello, Elizabeth. Bláthnaid Bergin: Hello, Elizabeth.

Morning, Simon. Morning, Bláthnaid. I just had one question, please. It was OnDemand as well. Given the kind of shift in competitive context there, obviously you have still got your first-party platform in ChopChop, which I assume is very small. I kind of think of it as maybe less than 5% of your total OnDemand business. I was just wondering how you are thinking about that now given the step-up in competition on the third-party platforms, and whether you might look to re-emphasize your first-party platform. Thank you.

Well, look, I am not going to talk about our next phase plans today because we are here obviously talking about the first half of this financial year. Maybe a couple of stats if it is helpful. Look, ChopChop sales in the first half of this year grew actually a bit ahead of our marketplace OnDemand platform, with 34% up in ChopChop. It is a much smaller part, as you say. Overall in the marketplace in the aggregators, we were up 27% in the half. As I said, actually, as we lapped the comp, what we found was we have 35% up in the first quarter, 17% up in the second quarter, whereas what we can see is a slightly higher performance in ChopChop. So look, obviously, ChopChop is a really important part of our proposition. You heard on the presentation how what we have done on our app now is joined together all of our propositions, so it is easier and much less friction for customers to shop. We are very focused on making sure we have got the capabilities today and tomorrow in the online space. Sales up 9% in online overall, customer satisfaction improving. We have done a lot of work to make sure that the customer experience in online is the one that we want to deliver for our customers. So it is a real focus for us. Obviously, as we look ahead to how customers can continue to evolve the way they shop in grocery, we are giving a lot of thought to make sure we continue to do the job that we need to do for them and build the capabilities accordingly. We are really encouraged with how we have delivered OnDemand. Chop Chop, a key part of our proposition, is making sure that we create a seamless experience. As I say, part of doing that, of course, is to make sure that the physical store has great availability because we are picking in our stores, right? One of the things we should never miss here is our availability performance is absolutely an underpin of delivering in OnDemand or in our core Groceries Online or in Chop Chop. You will remember in the presentation, we actually outperformed the market through this summer on availability by 2 points. I think that just shows how we get our store and logistics operations working to power online is also a really important part of this total platform of building. I will use that moment to say a big shout-out, actually, to all of our teams across supply chain logistics and in our stores this summer because it was a really demanding summer. Actually, with temperatures up 38 degrees Celsius, it put fresh food supply chains across the U.K. under real pressure, and our team did an amazing job to make sure that we could deliver that outperformance on availability to keep operations strong, even despite the weather. I think that just shows the combination of both the human determination and commitment, but also the capabilities that we have in our business now. Thank you.

Thank you. Our next question comes from Sreedhar Mahamkali with UBS. Please unmute your line and ask your question.

Sreedhar, hello.

Hi, good morning. Bláthnaid Bergin: Good morning.

Can you hear me?

Yeah, I can hear you, Sreedhar. Bláthnaid Bergin: Yes, loud and clear.

Okay, very good. Thank you. Listen, thanks for taking my questions. I think most of them are done already. Just a couple of ones. One is a clarification, Simon. I think what you're saying, I understand what you're saying, but just wanted to double-check. That is, I think in the context of this period of volume in some time versus industry for you, what does making balanced choices mean? Is that a change in trade plan to drive more volume or really try and focus on profitable volume? I thought I heard the latter, but I just wanted to understand that a little bit more. Secondly, I think you've hinted at efficiencies to come. You've built the bulk of the volume there in OnDemand, and I guess really, online as well. Have you started to see profitability improve already in the first half in OnDemand? And maybe take a very big step back, talk about the online as a whole, how you're seeing profitability trend there, either in the first half or maybe year out. If you could just talk through your thoughts there. Thank you.

All right. Well, shall I try and maybe pick up the first question then maybe more broadly on online? Yeah, look, let's just recap because super important, Sreedhar, to make sure we're all clear together. So look, I think we're all clear on the reality of volume in the market at the moment. We're all clear that it's become more subdued through quarter two for all the reasons we've talked about and just how much, in what is already a very competitive market, everyone's competing hard for the volume that's there. As I said a few minutes ago, we consistently see the strength of our proposition really connecting with customers, and therefore, our focus is on delivering and executing our plan to make sure that that trusted value week in, week out, and the ops that go with it, we're really in a good place. Look, you wouldn't expect us to add activity in that isn't sustainable or isn't profitable. When we think about where our plan is, we're going to obviously deliver for our customers the very best proposition in the second half of this year. We're going to focus on the things that we know our customers really respond to. In our range, we've obviously tightened up our range a lot today. We've brought the lower level up to now the GBP 1,025, GBP 1,065. We've done that to make sure that within that framework, we'll make the balanced choices we need to. We're not going to do things that aren't profitable. We're going to really focus on delivering the best offer this Christmas for customers. We feel very confident about our Food business. After multi years of volume outperformance, multi years of new customers joining Sainsbury's, year-on-year now, we've demonstrated the strength of our offer, and we'll continue to make sure we deliver that in the second half of this year and grow profit as we do it. Bláthnaid Bergin: Let me take the online operations.

Yeah. Bláthnaid Bergin: Look, we are really proud of what we do in online. We've been at this for decades. We're pretty good at it. If I talk about the GOL, let me start there, and then I'll move on to FOD. If I look at the GOL, our items picked per hour is really top end, top quartile. If we look at some of the technologies that's coming, some of the AI, some how that can drive efficiency, we see further opportunity to get even better at what we do today. If I look at the FOD then on the other side of it, that has emerged and developed really, really quickly. There's a lot of learnings from GOL that we can bring into that operation to drive efficiency. For us this year, it is really about standing back and saying, "How do we make a better, more efficient operation? How do we improve the customer experience as well in the Food OnDemand?" More to come on that in the new year as we talk about our strategy.

Thank you, Sreedhar.

Thank you. Thank you. Our last question comes from Clive Black with Shore Capital. Please unmute your line and ask your question.

Clive, morning.

Yeah, morning. Glad to see you've changed the name of my company, which is novel. Thank you for your presentation and time. My questions, three if I may. Quick ones. Simon, you talked about changes in the game with respect to your productivity program. I know in the new year you'll set out the next medium term outlook, but what do you mean by that? What is it that's changing the game? In that respect, are you indicating that you're confident of more productivity benefits to come? Then you set out on the Nectar program that you were looking for GBP 100 million of incremental gain to 2027, which is on track. I just wonder to what extent Pollen has changed that metric, gives you more confidence or even again, could lead to an elevated contribution in time. GBP 100 million, 3% of, say, the amount of questions on quick commerce at 3% of sales versus these other moving parts kind of staggers me. Just lastly, diet suppressant drugs. You talked about fresh food sales being up 4%+. I just wonder whether you're starting to see corresponding changes in demand around the impact of ultra-processed food and diet suppressant drugs that may be starting to influence the layout of your stores and where you take things going forward. Thank you.

Clive, thank you. We will definitely It's corrected now on screen.

Very good.

So all good. Let's take those in turn. I think on the first question that you know well, throughout our plan since we started in 2020, we've been really clear that we have to save in order to create the investment capacity in order to win. That's been the core foundation of how we've thought about our plan now over six years. As we said in the upfront presentation, we're on track to deliver GBP 1 billion of cost saving over three years. That will be GBP 2.3 billion of cost saving over the six years of Food First and Next Level Sainsbury’s. We've got a fantastic team in our business working day-in, day-out, looking at where we can become more efficient. It's not about cost saving, it's about efficiency and productivity so that we can deliver better for customers, and we can also find new ways of working. I think you can see today, even in the first half of this year, and if you take a fundamental in grocery retailing, how do you handle reducing product in the most optimized way so you reduce waste, you go back to the products as few occasions as necessary, and you make sure you get that freshness back in the supply chain. That would be a really good example where we're using AI technology. We've put a new capability in place. It's making double digit million impacts on the cost base. It's saving time in store. It's giving customers better freshness. So whether it be that, whether it be what we're doing on self-checkouts, video analytics to make sure that we are helping everyone that comes to our store to fully pay for the items at the checkout, whether it be what we've done on facial recognition. So these are examples of technology driven capabilities. We're thinking a lot about how we connect the whole operating system in the store together. We think about all of the store operational tasks that happen hundreds, thousands of times every day in a store. The huge opportunity actually to think about how we do that in a really connected way with technology helping that, and we'll be talking more about that with you as we look forward. Productivity is absolutely the heart of the way we've delivered our plan today, and of course, will be fundamental as we continue to look forward. It's one of the things you remember in 2024 when I said to you, we said to the market, we were taking the opportunity to invest in new technology, to invest in new capabilities at a time when other competitors didn't have the balance sheet strength to do that. You can see in the Next Level plan how that's really played through. I think on your second point, we're really excited about Nectar and Nectar360. As I said earlier, Mark and Emma and the team have done a fantastic job really building a platform in Pollen, which means that now 600 campaigns in the first half, 100+ clients, building unique capabilities that no one else in Retail Media space are able to do today. You saw as a result of that investment and that capability, the kind of accreditation that Nectar360 is now getting. Look, we are not complacent here at all, but this is moving very quickly, as you know, and as you have said, it is a fundamental part of delivering and building strategic capability for the future in grocery. We have got very exciting plans to continue to drive this forward. It is the highest returning investment in terms of capital. It has been a huge focus in Next Level, and we will continue to drive forward. We are on track to deliver GBP 100 million we committed. Almost more importantly, having leading capability in this, absolutely at the heart of this, that we made strategic investments choices that are giving us that competitive advantage. Look, I agree with you, when we think about the topics we have covered on the Retail Media and loyalty that customers love is fundamental to creating value in this industry. We have taken, as you know, a real leadership position in doing that. On your last question, look, I think maybe just half a step back on this. Sainsbury's over decades has always been at the heart of the nation's food conversation, however customers want to shop, whatever choices they want to make. I think as we enter this period where making healthier choices is very front of mind for customers want good value food, but they do not want to compromise at all on the quality or on the nutrition of the food that they buy. As you say, there are new trends happening, not least with GLP-1. We look at all of these shifts happening in the market. We are making a big shift on added sugar and health. We have made a lot of moves in the first half of the year, for example, in fiber. Really putting fiber choices at the front of how customers think. Actually using Nectar, we are helping to nudge and point customers towards personalized choices about the different products we have, the different health choices they might want to make. Specifically to your question, look, no surprise, the categories that are growing fastest as a result of GLP-1 are protein, dairy, produce. We have just done the biggest space reset in our company for six years in fresh food, which means we are using our space to make sure we are responding to how customers want to shop. Our job is to give customers the best choice and assortment. One of the things that we have done through Food First and Next Level is to really champion the assortment we have. So whatever diet you want to buy to, Sainsbury's becomes your first choice, and that is the reason for the big fresh food reset we have just done this autumn. We have moved pretty much every fresh food area around in our stores, opened up capacity to the areas that are growing. In dairy, for example, one of the fastest fresh food category growth areas, we have really reset the store and we are seeing the benefits of that already.

Thank you very much for your time. Appreciate it.

Thanks, Clive.

Bye.

Have we any more questions?

That was our final question. Bye now.

All right. Let me just wrap up the call then to say, first of all, thank you for some very good questions this morning. I hope we have been able to give you all the color on the results on our latest this morning. It has been very good to speak together with you this morning. So a big thank you from Bláthnaid and I, and obviously look forward to seeing you soon. Thanks a lot for joining the call.