However, the retail giant insisted that it is well-placed for the key festive period after strengthening trade over the latest quarter. The group, which also owns the Argos chain, said underlying pre-tax profit fell by 8 per cent to £340 million over the half-year to September 17, compared with the same period last year. It said profits for the current year are set to decline as it chooses to invest more into its pricing and pay improvements for workers.
The retailer also revealed that total revenues were up 4.4 per cent to £16.4 billion over the half-year, compared with the same period in 2021. Like-for-like sales, excluding fuel, dipped 0.8 per cent over the six-month period after declining against pandemic-boosted figures at the start of the period. However, the group said it saw a 3.7 per cent rise in like-for-likes sales over the past quarter as its grocery business witnessed accelerating inflation and a benefit from warm summer weather.
Zoe Gillespie, investment manager at wealth firm RBC Brewin Dolphin, said: “Sainsbury’s, much like its peers in the UK groceries market, is stuck between a rock and a hard place with tough comparators during the Covid-19 pandemic, increasing labour costs and the impact of high inflation. Sales have remained robust, but the effects of the macro-economic situation are beginning to filter through into profitability. It is a tough time for supermarkets, but Sainsbury’s is taking some good steps in the right direction and is well placed for the key Christmas period.”
Sainsbury’s said it has benefited from investment to help swallow cost inflation for key products and keep pricing lower for customers, with £500m to be invested in pricing. It said it is “well placed through the peak trading period and into next financial year to support customers as they manage further cost-of-living pressures”.
The group is halfway through a £1.3 billion cost-saving programme which has seen it shut down in-store restaurants and standalone Argos shops. It said it expects to close about 50 Argos stores this year as part of the previously announced plans, with some 25 Argos sites set to open within larger Sainsbury's shops.
Chief executive Simon Roberts said: “We really get how tough it is for millions of households right now. Customers are watching every penny and every pound and we know that they are relying on us to keep food prices as low as we can.”
Mark Crouch, analyst at social investing network eToro, noted: “Conditions in the grocery sector are tough at the moment and inflation is putting intense pressure on already wafer-thin margins. Sainsbury’s forecasts that its efforts to keep a lid on prices will cost it more than £500m by the coming spring. That’s £500m wiped off the bottom line and money that could have ended up in the pockets of staff or shareholders. While Sainsbury’s interim results are far from terrible, it’s difficult to get excited about the prospects for the grocery sector as a whole until we start to see the emergence of a more benign economic environment.”