Sainsbury’s has warned that its profits this year will be hit by soaring inflation and a drop in customer disposable income.
Britain’s second-biggest grocer behind Tesco said its underlying pre-tax profit in 2022-23 is expected to be between £630m and £690m, compared to the £730m underlying profit it declared for the year to March 5, 2022.
Millions of people in Britain are facing steep rises in energy bills, council tax and an increase in National Insurance tax – as well as inflation reaches its highest level in 30 years at 7%.
And wages are not keeping up – employers proposed an average annual wage increase of 4% in April.
“Significant external pressures and uncertainties”
In its financial results, the supermarket said: “The coming year will be affected by significant external pressures and uncertainties, including higher operating cost inflation and cost of living pressures which will impact customer disposable income.
“Against this backdrop, we are committed to continuing our steady improvement in grocery value, innovation and customer service, funded by our comprehensive cost savings program and expect to continue our strong performance. market share in grocery volume.”
Non-food sales were hit hard by supply chain difficulties, with general merchandise sales down 4.6%, but grocery sales rose 7.6%.
“Comprehensive savings plans”
Managing Director Simon Roberts said: “We know how strongly everyone is feeling the impact of inflation, which is why we are so determined to continue to deliver the best value for customers.
“We have been able to generate more investment in lower food prices funded by our comprehensive savings plans.
“As a result, we continue to inflate behind our competitors on the products customers buy most often.
“Last week, we announced the next bold phase of investment, lowering the prices of 150 of our largest fresh produce.”
He also said Sainsbury’s had spent £100million to boost staff salaries.
“All eyes are on the impact of inflation”
John Moore, Chief Investment Officer at Brewin Dolphin, said: “Overall, Sainsbury’s has delivered a good run of results over the past 12 months, but all eyes are on the impact of inflation in the year ahead.
“The supermarket expects the rising cost of living to affect its profits and it will have a difficult balance to strike between helping customers, increasing staff salaries and maintaining its commitment to shareholders. .
“But, with Argos and Habitat to rely on, the company has options to help it through this tricky time in a highly competitive grocery market.
“Self-help measures taken in recent years on debt reduction and cost management have also strengthened its balance sheet.”