Sainsbury’s food price cuts ‘fuelling growth’
Sainsbury’s chief executive Simon Roberts insisted the supermarket group is making every effort to cut food prices and says this is driving volume growth.
“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,” he said in a trading update.
“Food inflation is starting to fall and we are fully committed to passing on savings to our customers. Since March, we have invested over £60 million in lowering prices, leading on price cuts across more than 120 essentials like bread, butter, milk, pasta, chicken and toilet roll.
“Prices on our top 100 selling products are now lower than they were in March, against a market where prices have gone up. Customers have also saved over £90 million since we launched Nectar Prices in April.”
He said this price cutting together with good weather in recent weeks means food volumes and market share have grown.
Growth was led by the group’s convenience stores and supermarkets, as customers continued to return to stores.
For the 16 weeks to 24 June like-for-like sales (exc. fuel) were up 9.8%. Total Retail (exc. fuel) sales rose 9.2%. Grocery sales increased 11%. General Merchandise sales were 4% higher, with Argos sales up 5.1%. Clothing sales fell 3.7%
The outlook is unchanged as the group continues to expect FY23/24 underlying profit before tax of between £640 million and £700 million and to generate at least £500 million of retail free cash flow.
Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, commented: “This is a solid trading update from Sainsbury’s with a return to volume growth and an improved market share performance, with bank holidays and warmer weather towards the end of the period providing a welcome boost.
“Sainsbury’s has worked hard to lower prices in the face of intense competition. The launch of Nectar prices, where Nectar card holders save money on everyday items seems to have been well received and has helped the group to hold its own against Tesco and the German discounters.
“The group comments that food inflation is starting to fall and this should help ease pressure on consumers, whose finances have been squeezed from all angles by rising prices, no more so than for the weekly shop.
“That said, it is far too early for Sainsbury’s to declare victory. The competitive environment continues to heat up with Aldi, Lidl and Amazon all looking to expand in UK grocery. Cost pressures remain intense, for both Sainsbury’s and its customers, meaning profits will likely go nowhere this year. But for now, the group is holding its own.”
Ryanair said it carried 17.4m passengers in June, up 9%year-on-year despite being forced to cancel more than 900 flights as it was hit by air traffic control strikes across France.
The Dublin-based carrier said around 160,000 passengers were affected by the cancellations.
French air traffic controllers staged a series of strikes last month, with the latest – a 34-hour walkout ending on June 30 – marking their 60th day of strike action this year.
The FTSE 100 index closed down 4.27 points, 0.1%, at 7,527.26.
US stocks made some modest gains, but interest was relatively low-key with the latest ISM manufacturing numbers for June pointing to continued weakness in that part of the US economy.
During an abbreviated session in New York on Monday, the Dow Jones Industrial Average closed flat, the S&P 500 added 0.1%, while the Nasdaq Composite rose 0.2%.