J Sainsbury : 04 May 2016 Preliminary Results for the 52 weeks to 12 March 2016

Significant progress made delivering our strategy in a competitive market

• Volume and transaction growth driven by: product quality improvements, our simpler pricing strategy to focus on lower regular prices and market-leading service and availability
• Multi-channel strategy delivering strong growth in convenience and online
• Non-food continues to grow with strong performance in clothing, general merchandise and financial services

Mike Coupe, Chief Executive of Sainsbury's, said: 'We are making good progress against the strategy we outlined to shareholders in November 2014. We continue to outperform our main supermarket peers and maintain market share in a competitive, deflationary environment. We deliver great quality products and services at fair prices, whenever and wherever customers want to shop - and with volumes and transactions up, it is clear customers are responding positively to our offer. Our core food business performed well, underpinned by our quality investment programme, our simpler pricing strategy and lower regular prices. We also saw strong growth in clothing and general merchandise, as well as in our convenience and online channels. These results reflect the multi-product, multi-channel shopping experience customers are looking for today and our proposed acquisition of Home Retail Group plc will accelerate our strategy in this direction.

'We continue to manage our costs and capital expenditure carefully and, after making operating cost savings of £225 million this year, we are on track to deliver our three-year £500 million cost saving programme by the end of 2017/18. Ongoing pricing pressures and food price deflation have impacted our sales and operating margins. As a result, underlying profit and earnings per share are down this year versus last year.

'The market is competitive, and it will remain so for the foreseeable future. We believe we have the right strategy in place and are taking the right decisions to achieve our vision to be the most trusted retailer where people love to work and shop.'

David Tyler, Chairman of Sainsbury's, added: 'Our strategy is built on the fundamental strengths of our business - great heritage, quality food, fair prices and strong values. It recognises that customers will increasingly shop through multiple channels and according to their varying needs. Our business will continue to evolve and adapt to changing shopping needs, ensuring that we exceed customer expectations in an increasingly fast-paced, digital world.

'We are focused on building shareholder value and are confident that by following our established strategy, driving efficiencies and managing costs carefully, we will achieve this. We are committed to paying an affordable dividend to our shareholders and have maintained this at 2.0 times cover. We are therefore recommending a final dividend of 8.1 pence per share this year, making the proposed full year dividend 12.1 pence per share.'

Business Performance

Statutory Reporting

Strategic and operational highlights

Our vision is to be the most trusted retailer where people love to work and shop. We are delivering this through the five pillars of our strategy. This year we have made significant progress against each pillar which has meant we have grown volumes and customer transactions and maintained our market share.

We know our customers better than anyone else

• We introduced a new customer insights system and customer relationship management platform which give us an even greater understanding of our customers and allow us to meet their individual needs better
• In response to customer feedback, we have tailored our ranges and simplified our pricing strategy to offer greater choice and flexibility for shoppers. We will become the first major retailer in the UK to remove the vast majority of multi-buy promotions across our grocery business by August 2016 in favour of lower regular prices. In April, 2016, we announced we are replacing Brand Match with lower regular prices on products that matter most to customers
• Our 2015 Christmas is for Sharing advert was credited as the most popular Christmas advertising campaign by online views and by industry critics

Great products and services at fair prices

• We are making improvements to the quality of 3,000 own-brand products, with 750 improved to date and we continue to lead on quality perception
• Our Taste the Difference range grew volumes by nearly two per cent and was voted best supermarket range by the Good Housekeeping Institute for the third year running
• We have invested in the price of everyday products, which continues to drive improved price satisfaction scores and ensure we remain competitive
• We delivered a good performance from general merchandise, which grew sales by 3.5 per cent. Clothing grew sales by 8.5 per cent, ahead of the market
  • Sainsbury's Bank performed well, achieving £65 million underlying profit and trading performance supports plans to launch mortgages. We are making good progress on our transition to a new, more flexible banking platform and total transition costs are forecast to be at the top of the £340 million to £380 million range

There for our customers

• We now trade in 601 supermarkets. New formats are being trialled in six of these stores
• Convenience now generates sales of over £2.3 billion; we opened 69 convenience stores during the year and delivered over nine per cent sales growth
• Groceries Online achieved nearly nine per cent sales growth and order growth of nearly 15 per cent. We have 101 Click & Collect grocery sites with a plan to increase this to 200 by the end of the next financial year
• Working with our partner Dansk Supermarked, we have opened 15 Netto stores. We have trialled a variety of location types to help build our insight and continue to benefit from operational insights in our core business. We will now review the performance of the business in light of the overall market and we will communicate our next steps for the business at our Interim Results in November 2016

Colleagues making the difference

• We have won a significant number of awards for our high levels of customer service this year, including the industry-leading Grocer Gold Customer Service and Availability Awards for the third year running. We were named Grocer 33 Store of the Week 19 times in the year, the highest of any grocer, proving that our colleagues really do make the difference
• We are proud of the strong loyalty within our workforce - nearly 28,000 of our colleagues have worked at Sainsbury's for 15 years or more
• Colleague training and development continues to be a key area of investment. We are growing our digital capability to prepare us for the future, hiring 480 new digital-focused colleagues

Our values make us different

• Living Healthier Lives: We launched a My Goodness! ready meals range review: the new range includes at least one five-a-day fruit or vegetable serving. Innovative, healthy prepared vegetables such as courgetti (spiralized courgette) and boodles (butternut squash noodles) significantly exceeded sales expectations since launch in January
• Sourcing with integrity: By working with our 822 sheep farmers, we extended our British lamb season by five weeks
• Respect for our environment: An ambitious £10 million five-year project to tackle household food waste, Waste less, Save more, is well under way with the launch of our innovation test-bed town, Swadlincote, South Derbyshire
• Making a positive difference to our community: More than £1.5 million raised from the book and companion toy from our 2015 Mog's Christmas Calamity campaign was donated to Save the Children's literacy campaign Read on, Get on; we have now raised over £100 million for Comic & Sport Relief since 1999
• Great place to work: We were proud to co-sponsor the largest ever survey of race equality in the UK workplace. The survey was run by Business in the Community and completed by 24,000 working people (including over 4,000 Sainsbury's colleagues) to better understand the experience of ethnic minorities at work in the UK

Notes:

1. Underlying group sales excludes an £11 million adjustment (2014/15: £23 million) for fair value unwind relating to the acquisition of Sainsbury's Bank.

2. Underlying profit before tax: Profit before tax before any profit or loss on the disposal of properties, investment property fair value movements, retail financing fair value movements, IAS 19 pension financing element and defined benefit pension scheme expenses, acquisition adjustments and one-off items that are material and infrequent in nature, but after the coupons on the perpetual subordinated capital securities and perpetual subordinated convertible bonds.

3. Underlying basic earnings per share: Underlying profit, net of attributable taxation, divided by the weighted average number of ordinary shares in issue during the year, excluding those held by the Employee Share Ownership Plan trusts, which are treated as cancelled.

4. Return on capital employed: Underlying profit before interest and tax, divided by the average of opening and closing capital employed (net assets before net debt).

5. Kantar Worldpanel 52 week Till Roll data ending 28 February 2016.

6. HPI Brand & Communications Tracker - National sample data of Sainsbury's customers between 2014 and 2016.

7. Kantar Worldpanel (24 weeks ended 14 February 2016).

8. Certain statements made in this announcement are forward-looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from any expected future events or results referred to in these forward-looking statements. They appear in a number of places throughout this announcement and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. Unless otherwise required by applicable law, regulation or accounting standard, we do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise.

9. Sainsbury's will report its 2015/16 First Quarter Trading Statement at 07:00 (GMT) on 8 June 2016.

10. An interview with Mike Coupe, Chief Executive, about the Preliminary Results will be available to download from 11.30am on 4 May, 2016 in video and transcript form at: www.j-sainsbury.co.uk

A results presentation for analysts and investors will be held at 09:30 on 4 May 2016.

To view the slides of the results presentation and the webcast: We recommend that you register for this event in advance. To do so, visit www.j-sainsbury.co.uk and follow the on-screen instructions. To participate in the live event, please go to the website from 09:00 on the day of the announcement, where there will be further instructions. An archive of the webcast will be available later in the day.

To listen to the results presentation: To listen to the live results presentation by telephone, please dial 0800 678 1161 (or +44 (0)1296 311 600 if you are unable to use the primary number). The pass code for the event is 534 877. A transcript of the presentation and an archive recording of this event will be available later in the day at www.j-sainsbury.co.uk.