Sainsbury's Store
STRATEGIC ANALYSIS 2025

Sainsbury's

Next Level Transformation
in UK Food Retail

£31.6bn Sales
16.3% Market Share
150+ Years Heritage

EXECUTIVE OVERVIEW

Strategic Framework

01

Market Position & Heritage

Strong No.2 position with 150+ years of food retail heritage, commanding 16.3% UK market share and third consecutive year of growth.

02

Financial Performance 2024/25

Strong profit growth with £1.036bn operating profit (+7.2%) and disciplined cash generation supporting strategic investment.

03

Next Level Strategy

Transformational strategy focused on food, loyalty, and operational excellence with £1bn cost savings and £1.6bn+ free cash flow targets.

04

Competitive Landscape

Navigating market dynamics with strategic differentiation against discounters and traditional rivals through quality and service excellence.

Future Outlook

Strategic positioning for sustainable growth and value creation

£1bn+
Cost Savings Target
Market
CHAPTER ONE

Market Position
& Heritage

Strong No.2 position with 150+ years of food retail heritage and market share growth

16.3%
Market Share
3rd
Consecutive Growth Year

MARKET POSITION

The UK's Second-Largest Grocer

Sainsbury's has achieved its highest market share in nearly a decade through strategic focus on food

Market Share Evolution

16.3% Dec 2025

Highest market share in nearly a decade, demonstrating consistent growth trajectory

+30 basis points YoY, third consecutive year of growth

Market Leadership Indicators

Consistent Growth
Three consecutive years of market share expansion
Outperforming Market
+1.6pts vs. industry average in Q3 2025

Source: Reuters, Consumer Edge

STORE PORTFOLIO & EXPANSION

Multi-Format Retail Network

Strategic store network combining supermarkets, convenience, and integrated Argos destinations

Store Format Distribution

~600
Supermarkets
~800
Convenience Local
659
Argos Stores

Expansion Pipeline

New Stores (Coming Year) 40
Supermarkets 15
Convenience Local 25

Strategic Acquisitions

14 Homebase Stores Acquired
Adding 400,000+ sq ft retail space by end 2025
700,000+ Additional Customers
Within 10-minute drive of Sainsbury's over 2 years

Format Strategy

Supermarkets

Full-range destinations for weekly shops, featuring expanded food halls, integrated Argos collection points, and premium Taste the Difference ranges.

Convenience Local

Neighborhood-focused stores for top-up shopping, meal solutions, and food-to-go, tailored to local customer needs with optimized layouts.

Argos Integration

400+ Argos stores inside Sainsbury's, creating seamless general merchandise and grocery shopping with Fast Track collection and delivery.

Space Rebalancing Strategy

Converting non-food space to food in ~180 high-potential supermarkets, adding 300,000+ sq ft food stocking space

90,000
sq ft rebalanced in FY 2024/25
300,000+
target additional food space
Financial
CHAPTER TWO

Financial
Performance
2024/25

Strong profit growth and disciplined cash generation supporting strategic transformation

+7.2%
Operating Profit Growth
£531m
Free Cash Flow

FINANCIAL RESULTS

Revenue & Profitability Acceleration

Strong performance driven by food volume growth and operational leverage

£31.6bn
Retail Sales (ex-fuel)
+3.1%
£1.036bn
Retail Operating Profit
+7.2%
3.17%
Operating Margin
+16bps

Five-Year Revenue Trajectory

Key Performance Drivers

1
Food Volume Growth
Ahead of market, +35bps grocery volume share
2
Profit Leverage
+10bps retail operating margin improvement
3
Cost Savings
£349m delivered in first year of £1bn program

Profit Before Tax

£761m
Total Underlying PBT
+8.6%

Source: Sainsbury's Annual Report 2025

CAPITAL ALLOCATION

Cash Flow & Shareholder Returns

Disciplined capital management balancing investment, debt reduction, and enhanced shareholder returns

Cash Flow Analysis

Retail Free Cash Flow
Available for allocation
£531m
vs. £639m prior year
Capital Expenditure
Store expansion, technology
£800-850m
FY 2025/26 guidance
Net Debt
Strong balance sheet
£5.8bn
Leverage: 3.0x-2.4x target

3-Year Target: £1.6bn+ retail free cash flow to 2026/27

Shareholder Returns

Dividends Paid £308m
13.6p per share (+3.8%)
Share Buyback FY 2024/25 £200m
Program completed
Total Returns £508m
Strong cash returns to shareholders

FY 2025/26 Capital Return

£200m+
New Share Buyback Program
Progressive dividend policy maintained

Financial Services Transition

Bank Core Banking Sale NatWest
Argos Cards Sale NewDay
ATM Business Sale NoteMachine

Source: Sainsbury's Annual Report 2025

Strategy
CHAPTER THREE

Next Level
Strategy

Transformational strategy focused on food, loyalty, and operational excellence through 2027

£1bn
Cost Savings Target
£1.6bn+
Free Cash Flow Target

NEXT LEVEL STRATEGY

Four Strategic Outcomes

Comprehensive transformation plan launched February 2024 with clear commitments through 2027

1

First Choice for Food

Attract many more people to choose Sainsbury's as the place they come to for good food and play a leading role in creating a sustainable food system in the UK.

Food volume growth ahead of market
Enhanced value and quality perception
Expanded food space in stores
2

Loyalty Everyone Loves

Build a world-leading loyalty platform that is more personalised, joyful, rewarding and transparent for everyone.

Nectar Prices expansion
Your Nectar Prices personalization
Digital engagement growth
3

More Argos, More Often

Unleash and transform Argos around curated range, convenient experience and great value so more customers buy more complete baskets more often.

Digital-first transformation
Space optimization strategy
Enhanced customer experience
4

Save & Invest to Win

Save £1 billion and invest in transforming capabilities to take another big leap forward in efficiency, productivity and customer focus.

£1bn cost savings by 2026/27
Technology and automation investment
Operational efficiency gains

Eight Strategic Commitments

Food Volume
Ahead of market
Customer Satisfaction
Higher by 2026/27
Colleague Engagement
Higher by 2026/27
Plan for Better
Sustainability commitments

STRATEGIC OUTCOME 1

First Choice for Food

£1bn invested in price over four years, driving volume growth ahead of market

Food Performance

4.5%
Grocery Sales Growth
+35bps
Volume Growth vs Market
Aldi Price Match
Expanded to 800 everyday products
Primary Customers
18% increase over four years
Basket Size
Increased through value focus

Store Investment

Food Space Expansion 300k+ sq ft
Space Rebalanced FY 2024/25 90k sq ft
High-Potential Stores ~180

Taste the Difference: Premium Success

1 in 3
Baskets Contain Taste the Difference
Fastest-growing premium range in market
600+ New Products
Launched in premium range
20% Sales Growth
Strong performance vs. prior year
Sustainability Focus
Responsible sourcing commitments

Value Investment

£1bn
Invested in Lowering Prices
Over four years since Food First
800
Aldi Price Match Products
Inflation
Below Cost Protection

STRATEGIC OUTCOME 2

Nectar: Loyalty Everyone Loves

World-leading loyalty platform driving personalization, customer retention, and market share gains

Customer Savings & Engagement

£2bn
Saved by Customers
Through Nectar Prices in 2024/25
7,000+
Nectar Prices Products
18%
Primary Customer Growth

Personalization & Digital

Your Nectar Prices Live
Great Fruit & Veg Challenge 785k
Portions Purchased 133m

Nectar Platform Impact

1
Personalized Value
SmartShop customers receive Your Nectar Prices on regularly purchased items
2
Customer Retention
18% increase in primary customers who do majority of shopping with Sainsbury's
3
Basket Growth
Increased basket sizes through targeted offers and loyalty incentives

Nectar Ecosystem

Sainsbury's
Exclusive pricing
Argos
Points collection
350+ Partners
eBay, Esso, etc.

Legacy & Scale

20+ years of loyalty leadership with 1 trillion points issued by December 2022

£6.2bn+
Total Points Value Issued

STRATEGIC OUTCOME 3

More Argos, More Often

Transforming Argos around curated range, convenience, and value to drive complete basket purchases

Argos Performance Metrics

£4.9bn
Revenue
~£200m
EBITDA
Digital Sales Penetration 70%+
Mobile Web Transactions 63%
Stores Inside Sainsbury's 400+
Total Argos Stores 659

Transformation Strategy

'More for More' Space Rebalancing
90,000 sq ft rebalanced in FY 2024/25
Digital-First Experience
70%+ digital sales, mobile-optimized
Fast Track Convenience
Same-day delivery, click & collect

Market Challenges

Subdued general merchandise market with highly competitive conditions

Sales Change FY 2024/25 -2.7%
Q4 Recovery +1.9%

Financial Services Transition

Core Banking Exit

Sold to NatWest, transitioning to distributed model

Argos Cards Sale

Sold to NewDay, partnering for new digital credit proposition

Sustainable Income

£40m+ annual profit from commission income by FY 2027/28

Competition
CHAPTER FOUR

Competitive
Landscape

Navigating market dynamics with strategic differentiation through quality, value, and service

+1.6pts
vs. Industry Average
16.0%
Market Share Q3 2025

COMPETITIVE ANALYSIS

Market Dynamics & Strategic Response

Sainsbury's maintains strong No.2 position while outperforming industry growth rates

UK Grocery Market Share (Q3 2025)

Competitive Positioning

Sainsbury's: +1.6pts vs. industry
Outperforming market growth
Tesco: +2.0pts vs. industry
Market leader maintaining momentum
Asda: -8.5pts vs. industry
Historic low 11.5% market share

Strategic Differentiation

vs. Discounters (Aldi, Lidl)
Quality differentiation + Aldi Price Match on 800 products
vs. Traditional (Tesco, Asda)
Premium positioning with Taste the Difference, Nectar loyalty
vs. Online (Ocado)
Integrated Argos general merchandise, omnichannel convenience

Competitive Advantages

Brand Heritage
150+ years of quality
Premium Quality
Taste the Difference leadership
Customer Loyalty
Nectar ecosystem
Multi-Channel
Supermarkets + Argos + Local
Future
CHAPTER FIVE

Future
Outlook

Strategic positioning for sustainable growth and enhanced shareholder value creation

~£1bn
Operating Profit Guidance
40
New Stores FY 2025/26

STRATEGIC OUTLOOK

Outlook & Growth Trajectory

Positioned for continued outperformance through Next Level strategy execution

FY 2025/26 Guidance

Retail Operating Profit
~£1bn
Sustained profitability
Retail Free Cash Flow
£500m+
Strong cash generation

Capital Returns

£200m+
Share Buyback Program
FY 2025/26
Progressive Dividend Maintained
Special Dividend Potential Bank Sale

Growth Initiatives FY 2025/26

1
Store Expansion

40 new stores (15 supermarkets, 25 convenience), 700k+ additional customers within 10-min drive

2
Smart Charge EV Network

75+ supermarket locations with 600+ ultra-rapid charging bays, £25m invested in 2024/25

3
Technology & AI

AI-enabled stock optimization, enhanced personalization, operational efficiency gains

4
Cost Savings

£1bn target by 2026/27, £349m delivered in first year

Next Level Commitments Through 2027

£1bn
Cost Savings
£1.6bn+
Free Cash Flow
Higher
Customer Satisfaction
Higher
Colleague Engagement
Sainsbury's
LIVE WELL FOR LESS

Positioned for Continued
Market Outperformance

Sainsbury's Next Level strategy, combining value leadership, quality excellence, and world-class loyalty, positions the retailer to strengthen its market position and deliver sustainable shareholder value while helping customers live well for less.

16.3%
Market Share
£1.036bn
Operating Profit
£2bn
Nectar Savings
52.8%
Emissions Reduced