Sales (inc VAT) increased by 5.7 per cent to £16,987 million (2004/05: £16,076 million) and 6.1 per cent on an Easter adjusted basis, with significant contributions from like-for-like growth, new space and petrol. Easter adjusted like-for-like sales excluding petrol were up 3.7 per cent, with strong performances delivered within food, non-food and Convenience. The positive sales growth was achieved with increased volumes, being offset by grocery price deflation of 1.5 per cent, as a result of continued investment in the customer offer.
KPIs
| 28 weeks to 8 October 2005 | 24 weeks to 25 March 2006 | 52 weeks to 25 March 2006 | 52 weeks to 26 March 2005 | |
|---|---|---|---|---|
| Like-for-like sales ex petrol (Easter adjusted) – % | 2.1 | 5.3 | 3.7 | (0.4) |
| Grocery price deflation 1 – % | (1.4) | (1.6) | (1.5) | (1.0) |
| Retail operating margin (retail underlying operating profit divided by retail sales ex VAT) – % | 2.06 | 2.43 | 2.24 | 2.07 |
The impact of petrol on like-for-like growth remained positive with Easter adjusted like-for-like sales including petrol up 4.1 per cent.
Sales (inc VAT) before petrol and Sainsbury's Bank increased by £722 million. This is a key indicator of underlying supermarket performance and the sales measure used within the J Sainsbury plc Share Plan 2005. This performance is an important first step towards the commitment to grow these sales by £2.5 billion as part of the Making Sainsbury's Great Again plan.
New space provided a significant contribution to sales growth during the year, with 367,000 square feet of floor space added, an increase of 2.2 per cent, of which 0.6 per cent was from extensions. During the year 14 new supermarkets, including a further nine Safeway branded stores purchased from Morrisons, and 20 new convenience stores were opened, five of which related to the acquisition of SL Shaw Ltd. The Group made further investment through the completion of nine extensions, 28 refurbishments and one downsize in the supermarket estate and 94 refurbishments and conversions of convenience stores.
| Supermarkets | Convenience | Total | ||||
|---|---|---|---|---|---|---|
| Number | Area 000 sq ft |
Number | Area 000 sq ft |
Number | Area 000 sq ft |
|
| As at 26 March 2005 2 | 446 | 15,592 | 281 | 778 | 727 | 16,370 |
| New stores | 14 | 295 | 20 | 60 | 34 | 355 |
| Closures | (5) | (112) | (4) | (17) | (9) | (129) |
| Extensions 3 | - | 141 | - | - | - | 141 |
| As at 25 March 2006 | 455 | 15,916 | 297 | 821 | 752 | 16,737 |
- Restated for the transfer of Centrals into the convenience division.
- Includes the impact of downsizes and other size adjustments.
Retail underlying operating profit increased to £352 million (2004/05: £308 million). Higher sales volumes and cost efficiencies helped mitigate the impact of investment in price and increased store labour costs, as improved pricing and service remain core to maintaining focus on what is right for the customer.
Gross margin during the year continued to reflect the commitment to invest £400 million in the customer offer (in both price and quality), outlined in the Making Sainsbury's Great Again plan. This helped drive the sales led recovery by ensuring that Sainsbury's continues to offer great food at fair prices.
In 2005/06 the operating efficiencies which underpin the Making Sainsbury's Great Again plan began to emerge. Significant improvements were noted in the overall level of stock loss, which given that it coincided with improved availability within stores was even more significant. Following the completion of the Store Support Centre reorganisation, savings were also realised within the Group's central costs.
In the second half of the year the Group started to see the early benefits of process efficiency in store and supply chain coming through in lower costs. The Group is on track to deliver the target cost savings identified as part of the recovery plan and plans are in place to deliver the expected level of savings in 2006/07. However, the Group remains sensitive to increasing external cost pressures on the retail industry, principally relating to increases in rent, rates and general wage pressures. Additionally, the Group's fixed energy contract is due to expire in October 2006. This will add an estimated £55 million to energy costs in the second half of 2006/07 and an additional £20 million in the first half of 2007/08.
Improved levels of availability and service in stores were also reflected in the online home delivery operation, Sainsbury's Online. Online sales were up over 25 per cent during the year, with customer orders up over 20 per cent. The service is now being further extended.