Sainsbury’s profits dip as it tries to keep prices low

Sainsbury’s has claimed to be passing on rising costs to shoppers at a slower rate than its competitors, saying its decision is partly responsible for a dip in first-half profits.

The UK’s second-biggest supermarket chain by market share, which also owns Argos, updated on its progress as the “big four”, also including Tesco, Morrisons and Asda, battle each other and attempt to counter the challenge from discounters Aldi and Lidl.

Soaring inflation – mostly a result of Russia’s war in Ukraine – has intensified a post-financial crisis price war and Morrisons has overtaken in the market share stakes as households focus on value.

The official rate of food inflation stood at 14.5% last month.

Sainsbury’s boss Simon Roberts said on Thursday that the cost of living crisis had prompted a “growing trend” of people eating at home instead of going out.

He added that customers were also clearly buying Christmas goods now to spread out the cost, while the company also confirmed it had ordered more turkeys for the festive season in case the avian flu outbreak hinders supply.

It is feared that bird flu could result in supplies of fresh Christmas turkeys running short

The company reported underlying pre-tax profits of £340m for the six months to 17 September.

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The figure represented an 8% decline on the same period last year, despite a stronger second quarter for sales.

They rose by 3.7% on a like-for-like basis after a 4% decline over the first three months of its financial year.

Sainsbury’s maintained annual profit expectations at between £630m-£690m, down on the £730m achieved in 2021/22, saying that trading momentum had remained strong despite the squeeze on shoppers’ budgets.

The company revealed that it was looking to hire 18,000 workers to cover the Christmas rush.

Mr Roberts said of the tough environment: “We will have invested more than £500m by March 2023 in keeping prices lower by cutting our costs at a faster rate than our competitors, meaning we have more firepower to battle inflation.

“Over the past year and a half we have consistently passed on less price inflation than our competitors and I am confident we have never been better value.

“Argos is also performing well in a market where customers are looking for reassurance that they are getting great value and availability.”

Shares rose by 4% in early deals in the wake of the results.

Charlie Huggins, Head of Equities at Wealth Club, said of the figures: “These are solid enough results from Sainsbury’s, but it is difficult to get excited.

“It’s just such a tough industry, with fierce competition, fickle consumers and thin margins.”

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