Sainsbury’s has warned that the Iran war “will impact both our customers and our business,” as the supermarket giant saw its share price fall.
The FTSE 100 grocer’s underlying retail profit fell by more than one per cent to £1bn, which Sainsbury’s said was due to “significant operating cost inflation,” as total sales grew by five per cent.
The firm’s share price fell by more than five per cent on Thursday’s open to 334p, leaving the stock up one per cent in the year so far.
Fears over rising food inflation have heated up in recent weeks, with a leading industry body warning price growth could reach double digits this year.
Chief executive Simon Roberts said he is “relentlessly focussed” on providing value to firms, and will do “everything [he] can to support our customers”.
Sainsbury’s ‘uncertain’ of Iran war impact
Sainsbury’s position marks a more upfront approach to Iran war inflation fears than its rival Tesco, who last week sought to downplay the prospect of price rises.
Last week, Tesco boss Ken Murphy said he “does not recognise” the Food and Drink Federation’s forecast of between nine and 10 per cent food inflation this year.
Supermarket bosses are calling on the government to offer energy bill support to help them avoid hiking prices for shoppers.
Sainsbury’s boss Simon Roberts said on Thursday: “Rather than pass through the full extent of cost inflation, we invested to sustain the strength of our competitive position while also refreshing stores.”
In its results the grocer said: “We will continue to make deliberate, balanced choices to sustain this strong competitive position in the year ahead and expect to continue to outperform the grocery market.
“The conflict in the Middle East will impact both our customers and our business. The duration and extent of these impacts is very uncertain.”
Sainsbury’s delivered a bumper Christmas trading update in January, when it touted a 3.3 per cent growth in festive sales and a 3.9 per cent jump to £10bn.
The grocer is the UK’s second biggest with a 15.6 per cent market share, miles behind Tesco but a solid four per cent above Asda in third place.
Argos struggles persist
Sainsbury’s said Argos, which it owns, is continuing to battle with a “subdued market,” as sales increased marginally by 0.7 per cent.
The catalogue retailer was snapped up by Sainsbury’s in 2016, but analysts have warned that it is becoming a drag on the grocer’s performance.
The retailer cut over 2,000 jobs and lost more than £200m in its latest financial year and Sainsbury’s had been mulling a sale of the brand before it pulled out of talks with Chinese retail giant JD.com.
Sainsbury’s has set up a dedicated Argos management team, it said on Thursday, to “accelerate the pace” of its turnaround of the retailer.
The supermarket is investing heavily in its cut-price Nectar card ranges and Aldi price-match range, as it aims to compete with Asda and the German discounters.
Nectar Prices has delivered more than £5.5bn in savings since its launch in 2023, the grocer said.
