SAINSBURY’S offered hope to beleaguered shoppers today, saying that food inflation is starting to ease as it presented itself as the white night of the grocery scene.
It claims to be leading the way on slashing prices as the sector tries to fend off allegations of “greedflation”.
Yesterday it cut the cost of its own brand toilet paper by 11%. Today it said it had invested £60 million in price cuts on other essentials such as pasta and chicken.
The cost increases on one popular family meal – Spaghetti Bolognese – have been absorbed by the company, it said by example.
But with MPs baying for blood and some consumer groups convinced grocers are using inflation as a cover to put up prices, the pressure on the sector is unlikely to abate any time soon.
In the 16 weeks to June 24, sales rose by 9.8%, though clothing sales were down 3.7%, a sign that customers are cutting back on non-essentials.
For the full year, Sainsbury expects to make profits of between £640 million and £700 million, unchanged since the last time it updated the City, but an amount some will find hard to square with tough times for consumers.
Simon Roberts, the CEO under pay for a near £5 million pay deal, said: “We are putting all of our energy and focus into battling inflation so that customers get the very best prices when they shop with us, particularly now as household budgets are under more pressure than ever. Food inflation is starting to fall and we are fully committed to passing on savings to our customers.”
The average worker at the grocer is paid £22,000.
Argos, the electricals retailer it bought a few years ago, is gaining market share.
Regulators have found that supermarkets have widened profit margins on petrol prices, being slow to bring down costs while oil costs have fallen. Chancellor Jeremy Hunt has been in talks with regulators about how to help those hardest hit by the cost of living crisis.
Sainsbury shares are up 38% in the last six months but slipped 4p to 271p today.
John Choong at InvestingReviews.co.uk, said:
"Sainsbury’s Q1 update is certainly a bright spot for shoppers as food inflation continues to show signs of abating. The orange grocer has cut prices across more than 120 essentials, with the prices of its top 100 selling products now lower than they were in March, while the rest of the market continues to see increases. However, this has come at a cost to its top line as like-for-like sales only grew by 3.9%. The results pale in comparison to inflation that’s still running hot at 8.7%.”
Choong added: “It doesn’t help investor sentiment that the board has left its guidance of flat pre-tax profits unchanged, either. Nonetheless, this could be down to the company attempting to maintain a positive image having come under fire for ‘profiteering’ during the cost-of-living crisis by authorities."
Chris Beauchamp, Chief Market Analyst at IG Group, said: “Sainsbury’s thinks food price inflation is beginning to ease, something that will cheer consumers up. The supermarket finds itself in a solid position following another strong increase in sales, and puts it in a strong position for the rest of the year.”
