Executive Summary

• Sainsbury’s reported that group sales were up 11.6% in the year ended March 2017. Revenues were boosted by the acquisition of general merchandiser Argos as well as by growth in clothing and general merchandise, implying meaningful declines in Sainsbury’s grocery sales.
• Despite the company’s increased scale, operating profit fell by 9.2% and missed the consensus estimate. Lower comparable sales, investment in its offering and cost inflation eroded operating margins.
• In turn, underlying diluted EPS fell by 10.5%, but was in line with consensus.