Supermarket Sainsbury’s has revealed falling annual profits as it took a hit from soaring costs and held back price rises for shoppers – but said it is “determined to battle inflation for our customers”.
The UK’s second largest grocery chain reported a 5% fall in underlying pre-tax profits to £690 million for the year to March 4 as it spent £560 million on prices, saying inflation in its stores was less than half that seen across the sector as it also sought to compete with discounters Aldi and Lidl.
Boss Simon Roberts held off from saying the peak in food price inflation had passed, but said there was a chink of light, with prices falling for some products such as milk and fresh food as commodity prices begin to fall.
He said: “In some areas I’ve been more encouraged, but in others, let’s see how the next few months play out.”
Food price inflation has hit the highest level for more than 45 years, at 19.1% in the year to March, according to official data, putting households under immense pressure.
But figures from Kantar this week signalled a slight easing in grocery price inflation in April, to 17.3%, from last month’s 17.5%, though the report stressed it was too early to call the peak.
The Sainsbury’s figures showed profits also fell against a previous year that was boosted by pandemic restrictions allowing supermarkets to remain open throughout lockdowns.
Its result was at the top end of previous guidance for between £630 million to £690 million as like-for-like sales excluding fuel rose 2.6% over the full year, though this was boosted by price inflation, with sales by volume falling.
The group said profits for the year ahead are expected to be between £640 million and £700 million in a “still uncertain outlook for consumer spending”.
But this is higher than most analysts have forecast and the group said it has started the year with “great momentum”.
Mr Roberts said: “We really get how tough life is for so many households right now, which is why we are absolutely determined to battle inflation for our customers.
“Our focus on value has never been greater and we have spent over £560 million keeping our prices low over the last two years.”
He said that two years into a strategy overhaul, the group has “focused our efforts on reducing costs right across the business”.
Sainsbury’s recently revealed plans to shut two Argos depots in an overhaul that will affect 1,400 jobs, while it also announced a major restructuring of its 7,000-strong logistics operation.
“There is still much to be done and there is no doubt that the year ahead will remain challenging,” Mr Roberts said.
The figures show that comparable grocery sales rose 7.4% in the latest quarter, buoyed by rocketing food price inflation, while Argos sales jumped 9.3% in a marked turnaround in recent trading.
The group said it would look to “sustain” price investment over the year ahead, but declined to say if it would match the £560 million spent on prices in the year just gone.
On recent fresh vegetable shortages, Mr Roberts said availability of salad items such as tomatoes had “pretty much recovered”, but that it was expecting ongoing issues with egg supply following nationwide efforts to contain an outbreak of bird flu.
Victoria Scholar, head of investment at interactive investor said: “With the fiercely priced competitive German discounters Aldi and Lidl, Sainsbury’s has no choice but to keep prices low in order to preserve market share, rather than passing on additional cost pressures to consumers.”
She said the group was “facing pressure both on the demand and supply side of the equation”, with costs rising and consumer spending under pressure.
“Nonetheless, the outlook is starting to look more positive amid hopes that cost inflation will ease this year,” she added.