Sainsbury’s says profits this year will be hit by rising inflation and new limits on disposable incomes, with Argos sales particularly affected.
In its financial results, the company said: “The year ahead will be impacted by significant external pressures and uncertainties, including higher operating cost inflation and cost of living pressures impacting customers’ disposable incomes.”
Sainsbury’s has reported that underlying profit before tax in 2022-23 is expected to be between £630m and £690m, compared to the £730m underlying profit it has reported for the year to 5th March 2022.
The report added: “In that context, we are determined to continue our consistent improvement in grocery value, innovation and customer service, funded by our comprehensive cost savings programme and we expect to continue our strong grocery volume market share performance.”
Non-food sales in both the retailer’s supermarkets and its Argos chain were hit particularly hard by difficulties with supply chains, with general merchandise sales falling 11.9% versus full year 2021.
Chief executive Simon Roberts said: “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. Last week we announced the next bold phase of investment, lowering prices across 150 of our highest volume fresh products.”
The CEO dubbed Nectar, Argos, Habitat, Tu and Sainsbury’s Bank ‘Brands that Deliver’ and confirmed that they “are delivering for our customers and our shareholders and supporting investments in our wider customer offer.” He added: “The Argos transformation programme is on track and Argos is a more profitable business. 80% of Argos sales now originate online.”
The company said that integrating the Sainsbury’s, Argos and Habitat supply chain and logistics operations will save at least £250m when complete. Simon Roberts also highlighted that Sainsbury’s had invested in its workforce, spending £100m on pay rises for staff, bringing all salaries up to the Real Living Wage.
Speaking to Sky News, John Moore, senior investment manager at Brewin Dolphin, said: “Broadly speaking, Sainsbury’s has posted a good set of results for the past 12 months, but all eyes are on the impact of inflation in the year ahead. The supermarket will have a difficult balance to strike between helping customers, upping staff pay and maintaining its commitment to shareholders.
John added that the company must make good use of its Argos and Habitat brands, as ‘options to help it through this tricky period in a highly competitive grocery market’ and said that measures taken in recent years on debt reduction and cost management had strengthened the company’s balance sheet.