Sainsbury's say they will cut prices at its stores to compete with Tesco and Asda as the supermarket giant predicts flat profits.
The UK's second-largest supermarket chain revealed a 4.2 per cent increase in annual sales, excluding fuel, reaching £26.6 billion, and boosting its UK grocery market share. Underlying operating profits also saw a 7.2 per cent rise, hitting £1.03 billion for the year ending in March.
However, looking ahead, Sainsbury's anticipates profits to remain around £1 billion for the current financial year.
While the supermarket expects stronger sales volumes, this is predicted to be counterbalanced by reduced profitability due to intensifying price competition and escalating costs.
This announcement echoes similar sentiments from competitor Tesco, which recently projected weaker profits due to increased investment in price reductions to remain competitive.
The grocery market is clearly bracing for a period of tighter margins as supermarkets battle to attract and retain customers in a cost-conscious environment.
It comes amid pressure from Asda, the UK’s third largest chain, after its returning boss Allan Leighton said it would slash prices in a bid to turn around its fortunes.
On Thursday, Sainsbury’s said it was growing market share after investing £1 billion in improving its pricing.
The company also said it was launching its “biggest investment in expanding our store space in over a decade”, with about 40 new stores opening this year.
Grocery sales grew by 4.5 per cent for the past year, while sales at its Argos arm slipped by 2.7 per cent to £4.9 billion.
However, the retailer said it has started the new financial year with “good trading momentum” across all its brands after Argos grew in the final quarter.
Simon Roberts, chief executive of Sainsbury’s, said: “We have created a winning combination of value, quality and service that customers love, investing £1 billion in lowering our prices.
“Our belief in the strength of Sainsbury’s offer has driven our decision to make our largest investment in expanding our store space in over a decade as we open supermarkets in key new locations and extend food space within many of our existing stores.”
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