Sainsbury’s (SBRY.L) profits slumped last year as it took a hit from soaring costs and held back price rises for shoppers.
The UK’s second largest grocery chain reported underlying pre-tax profits of £690m for the year to March 4, down 5% on the previous year, when results were also boosted by pandemic restrictions that allowed supermarkets to remain open throughout lockdowns.
Simon Roberts, the chief executive of J Sainsbury, said the supermarket had spent more than £560m on keeping its prices down in the face of high inflation over the last two years
“We really get how tough life is for so many households right now, which is why we are absolutely determined to battle inflation for our customers,” Roberts said.
Food price inflation has hit the highest level for more than 45 years, at 19.1% in the year to March.
The supermarket chain's sales jumped by 5.4% to £35.15bn over the year, with grocery sales rising by 3%, “driven by inflation and improved market share performance”.
Sainsbury's said the outlook for consumer spending remained uncertain but it had started the new financial year 'with great momentum.'
It therefore expects its 2023 profits to come in above market expectations.
“Sainsbury’s strong position in and customer loyalty in the southeast really helps them in these difficult times. However, further price investment, through Nectar Prices, is needed to fend off discounter threats and keep competitive with Tesco,” Orwa Mohamad, analyst at Third Bridge, said.
“Nectar Prices seeks to replicate Tesco’s Clubcard, and it’s never a bad thing in any business to plagiarise what your biggest rival is doing well. It will allow Sainsbury’s to improve price perception while increasing operating margins as not all customers will use a Nectar card.”
“Thanks to the return of workers to city centres, Sainsbury’s has a significant opportunity in the convenience sector this summer.”
The board of directors has proposed a final dividend of 9.2p a share and a full-year dividend of 13.1p per share, “in line with last year.”
Watch: Sainsbury's sees fall in pre-tax profit as it reveals how much spent to 'keep prices low'