Operating Review

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Strong progress

We had a strong and sustained improvement in performance this year and this has added significant momentum to our recovery. Sales remain the purest measure of customer satisfaction in our business, so this year’s 7.3 per cent total sales growth (excluding Sainsbury’s Bank and including VAT) is a particularly important sign of progress.

Over the year we grew like-for-like sales, excluding fuel, by 5.9 per cent, despite limited maturing new space and extensions and the tougher comparatives of the previous year. We delivered our ninth consecutive quarter of increased sales in the last quarter of the 2006/07 financial year. This result represented growth on growth on growth and demonstrated continued improvement and momentum.

This strong sales performance is ahead of our own expectations. It’s also our best for many years. It shows that our recovery is ahead of plan and that we’ve made substantial progress in addressing many of the challenges outlined in our recovery plan.

Throughout the year we have focused on maintaining our lead in product quality and remaining very competitive on price. We’ve stepped up the development of our complementary non-food offer with the introduction of more ranges in more stores and we are growing our presence in the convenience sector.

With 788 stores across the UK, Sainsbury’s is a mainstream retailer and we’ve worked hard to restore ‘universal appeal’ – our ability to appeal to all shoppers. We serve more than 16 million customers each week, on average, and believe we can continue to grow.

Our emphasis on fresh and healthy food continues to set Sainsbury’s apart and contributed to this year’s strong sales performance. Our heritage provides an ideal market position for our brand, as customers increasingly want healthy, safe, fresh and tasty food. Supporting our recovery is our ‘goal’, which demonstrates that our values and beliefs have never fluctuated despite an ever changing and challenging market. We have focused single-mindedly on what our customers want; this has driven our recovery and will continue to do so.

The strong progress achieved over the year is built on lots of individual improvements, initiatives and actions within the business.

The strength of our offer

The values at the heart of the Sainsbury’s brand match the concerns and preferences of more and more people, and that has helped to drive our sales growth. Five principles underpin our activities and these are detailed in Corporate responsibility. The values that made Sainsbury’s stand out in the past, such as buying healthy and wholesome food and respecting the environment, which have been a key focus of the MSGA recovery plan, have become increasingly important to customers. This has inspired us as we addressed our problems and worked to fix the basics of our operation.