Sainbury’s forecasts profits fall as cost of living crisis bites

Sainsbury’s has warned profits will fall in the year ahead as it faces “significant external pressures” including cost inflation and a squeeze on its customers’ spare cash.

The UK’s second largest supermarket said it expected to make a full year profit of up to £690m in the year ahead, down from £730m in the year to March 2021 which it said was helped by £100m in extra sales driven by the Covid-19 pandemic.

The profits warning comes after sales at the supermarket rose 3.4% in the year to March led by a 60% increase in sales of petrol and a near 13% rise in sales of clothing as shoppers returned to socialising and the office as the pandemic restrictions were loosened.

However, sales of general merchandise slid almost 12%, led by toys and consumer electronics as sales at the group’s Argos chain were hit by supply disruption and more competition than during high street lockdowns when the businesses’ online capabilities saw it benefit.

Underlying pretax profits doubled to £730m as the company reduced extra costs related to staff and protective gear required during the pandemic. The group also received a one-off benefit of £182m in a legal settlement over credit and debit card fees.

Simon Roberts, the chief executive of Sainsbury’s, said the retailer was aiming to keep a lid on inflation compared with its rivals by cutting costs. Plans include introducing more automated tills and combine its delivery networks and supply chains for Argos, Sainsbury’s and Habitat.

“We know just how much everyone is feeling the impact of inflation, which is why we are so determined to keep delivering the best value for customers. We have been able to drive more investment into lowering food prices funded by our comprehensive cost savings plans,” he said.

Sainsbury’s shares fell nearly 7% after the results announcement, making it the biggest faller on the FTSE 100 on Thursday morning.


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