Sainsbury’s boss says food price inflation is starting to slow
Sainsbury’s reports higher sales at supermarket giant saying food price inflation is starting to ease
- Sainsbury’s boss says inflationary pressures are starting to ease
- Grocery reported a nearly 10% increase in like-for-like sales excluding fuel
- Shares are down 1.49% in early morning trading
Food price inflation is starting to fall, helping customers buy more, said the Sainsbury’s boss.
The supermarket reported that like-for-like sales excluding fuel rose 9.8 percent in the 16 weeks to June 24.
Grocery sales performed strongly, rising 11 percent over the period, boosted by holidays and warmer weather, but apparel sales struggled, falling 3.7 percent.
Prices are falling: Sainsbury’s boss Simon Roberts has said food inflation is starting to ease
Sainsbury’s said changes to its Nectar loyalty program have created “strong momentum”.
In April, the retailer launched Nectar Prices, similar to Tesco’s Clubcard scheme that offers members lower prices, which would be “further improved” later this year.
The retailer said it had spent more than £60m pushing down basic product prices with the introduction of Nectar pricing and the Aldi Price Match campaign.
However, the increase in sales is likely to reignite the food profit debate. The Competition and Markets Authority (CMA) is currently investigating whether competition between supermarkets works to keep prices low.
Recent figures from the Office for National Statistics (ONS) show that food inflation fell slightly in May, but is still stable at 18.4 percent.
“We are putting all of our energy and focus into fighting inflation so that customers get the very best prices when they shop with us, especially as household budgets are under more pressure than ever,” said CEO Simon Roberts.
“Food inflation is starting to come down and we are fully committed to passing savings on to our customers.”
The comments echo those of Tesco boss Ken Murphy, who said last month there were “encouraging” signs that inflation had begun to ease.
Roberts added that the prices of the supermarket’s 100 most popular products have fallen in the past quarter. Products such as bread, butter, milk, pasta, chicken and toilet paper have all been reduced in price since March.
Richard Hunter, Head of Markets at Interactive Investor said: “Strong expectations for retail free cash flow have been maintained, which should bode well for combating other issues beyond the scope of this trading review, such as the reduction of net debt.
“The continued cost-cutting program should also contribute so that the group can continue to invest in pricing.”
Shares fell 1.49 percent to 270.60 pence in morning trading, but are up nearly 30 percent over the past year. This compares to a four percent increase for the broader FTSE 100.
Hunter said, “The fierce competition is not just confined to the aisles, but also extends to investors. Indeed, the market consensus of the stock as a sell, with Tesco the game of choice in the industry, points to something of a divide between the two.
“It also confirms that while there is a lot to like in this latest release, there is also a lot to do for Sainsbury to regain some of its previous share price levels.”