Sainsbury’s profits have tumbled as it kept down prices to compete with Aldi and Lidl.
The UK’s second biggest supermarket has been ploughing hundreds of millions of pounds into cutting prices – despite facing soaring costs for staff, energy and products.
And as the group – which also owns catalogue retailer Argos – ‘consistently passed on less inflation’ than rivals, it said it was forced to swallow some of the costs itself.
Sainsbury’s profits have tumbled as it kept down prices to compete with Aldi and Lidl
Profit in the six months to September 17 fell 29 per cent to £376m – and that is despite overall sales rising 4.4 per cent to £16.4bn, driven in particular by a strong last three months.
Grocery sales rose 0.2 per cent in the six month period, including a 3.8 per cent increase in the last three. But despite a surge in sales of air fryers as shoppers look to cut their energy usage, sales at Argos slipped 6.1 per cent.
As Sainsbury’s heads into the Christmas period, chief executive Simon Roberts said ‘the big unknown’ was how families will celebrate this year.
The business said households are shopping earlier to spread the cost of the holiday and are snubbing restaurants to eat at home.
Roberts said shoppers are ‘watching every penny and pound’, meaning that Sainsbury’s was making sure customers ‘have no reason to go anywhere else’, including German discounters Aldi and Lidl.
Shoppers have flocked to the cut-price stores in their droves to save cash, with Aldi overtaking Morrisons in September to become the fourth biggest supermarket.
But Roberts said Sainsbury’s has narrowed the price gap between itself and Aldi in the past year with schemes such as its price match guarantee on 240 products. AJ Bell financial analyst Russ Mould said Sainsbury’s is doing a ‘decent job’ of keeping a cap on prices.
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