J Sainsbury’s (JSNSF) Q3 2016 Earnings Call

posted in: Earnings Call, Notes | 0

Mike Coupe – CEO

On the elections in the US

“Of course, the events of last night (the results of the US election) also may have some bearing on what happens next, so there are so many uncertainties it’s really difficult to predict. If you look at some obvious impacts, if you take the price of petrol, it has gone up by 5p a liter. We still remain extremely competitive on fuel, but it was GBP1.10 on June 22 and it’s now about GBP1.15 on average a liter. So there are some cost price pressures coming through, but it’s really difficult to predict how it will play out over the next period of time.”

Discretionary expenses cut when incomes are squeezed

“If you start with the premise that there is some food price inflation, which I’m not necessarily agreeing with, but let’s assume that we look at history and say what happens next, generally speaking, if customers start seeing their income being squeezed they start cutting back on the more discretionary things in their lives, holidays, eating out would be a good example. And you could argue that’s one of the things that’s weighed against the grocery sector…”

On Price expectations going forward

“…in half 1, it {price level) was minus 1%. Again, if you look at the two-year picture, prices are of the order of 4% lower, so everything that we sell compared with a couple of years ago. But it’s really difficult to predict. So I’ll go back to what I said earlier. It’s very difficult with all the moving parts that we’re talking about. And, again, the events of the last 24 hours (US elections) is part of the overall mix to predict exactly what’s going to happen in terms of inflation or deflation as we look forward. There’s clearly a currency element. There’s a commodity element.

Ed Barker – Interim CFO

Price declines hurting bottom line

“Given food price deflation and our continued investment in price this year, we’ve seen our retail operating profits decline by 7.2% to GBP308 million.”