Cost of living crisis hits profits at Sainsbury’s: Grocer ploughs money into supporting shoppers and staff
Sainsbury’s warned profits will take a hit this year as it ploughs money into supporting shoppers and staff through the cost of living crisis.
In an update underlining the pressure facing households and businesses, the UK’s second-biggest grocer said it was battling to keep down the cost of everyday items such as milk, bread and fruit.
And with competition mounting, Sainsbury’s boss Simon Roberts accused rivals of raising prices too quickly, exacerbating the squeeze on living standards.
Sainsbury’s boss Simon Roberts (pictured) accused rivals of raising prices too quickly, exacerbating the squeeze on living standards
It also said it was spending £100million to raise wages for its 189,000 staff.
The comments came as Sainsbury’s posted profits of £730million for the 12 months to March 5, more than double the £357million it made a year earlier. Sales last year rose 2.9 per cent to £29.9billion.
It said its dividend for the year would be 13.1 per cent a share – up 24 per cent.
But Sainsbury’s warned that profits will fall to between £630million and £690million this year – less than the £703million forecast by analysts – as it keeps prices down in the face of rising costs. Shares slipped 4.3 per cent, or 10.3p, to 228.7p.
The update came amid a brutal price war as supermarkets fight for customers worried about the cost of living.
This month, Tesco warned its profits would be hit as it looks to keep a lid on prices.
Industry figures from Kantar this week showed grocery price inflation hit its highest level since 2011, at 5.9 per cent.
Roberts insisted Sainsbury’s was increasing prices of its key products slower than the likes of Morrisons, Asda and Tesco.
He also said prices are rising less than at German discounters Aldi and Lidl, which now have a combined market share greater than that of Sainsbury’s and are seeing sales rise while others struggle.
Roberts said: ‘We can see the early signs of customers being a bit more cautious, watching every penny and every pound.
‘It is tough out there. The cost of living is on everyone’s mind and we will stand shoulder to shoulder with them.’
Shore Capital retail analyst Clive Black said: ‘Sainsbury’s management clearly sees the pressure on UK household incomes and is preparing for tougher conditions as shoppers start to see a more notable squeeze on spending power.’
Prices misery: Sainsbury’s, the UK’s second-biggest grocer, said it was battling to keep down the cost of everyday items such as milk, bread and fruit
Jefferies analyst James Grzinic said that the shares had fallen more than he expected and the supermarket had a ‘track record’ of cautious guidance.
Argos, which Sainsbury’s bought in 2016 for £1.4billion, is also expected to weigh on profits this year as struggling customers cut back on purchases of home goods, technology and toys.
Sainsbury’s has 1,407 supermarkets and convenience stores across the UK.