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Sainsbury’s to cap prices as it warns of lower profit amid cost of living crisis

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·Finance Reporter, Yahoo Finance UK
·3-min read
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Sainsbury's supermarket, amid the spread of the coronavirus disease (COVID-19), in London, Britain January 11, 2021. REUTERS/Hannah McKay
Sainsbury's has seen its profits more than double as the supermarket recovers from coronavirus costs. Photo:Hannah McKay/Reuters

Sainsbury’s (SBRY.L) has warned of a lower profit for the coming year as the cost of living puts pressure on shoppers.

Sainsbury’s reported an underlying profit before tax of £730m in the year to March, a 104% cent increase from the year prior, but warned of challenges down the line.

Simon Roberts, chief executive of the grocer, said: “We know just how much everyone is feeling the impact of inflation, which is why we are so determined to keep delivering the best value for customers.

“We have been able to drive more investment into lowering food prices funded by our comprehensive cost savings plans. As a result, we continue to inflate behind competitors on the products customers buy most often.”

Read more: UK households face £271 rise in food bills

The supermarket said its cost savings plan had enabled it to increase food prices at a lower level to competitors.

"Our job and what we are doing is to stem the tide of that as much as we can... and keeping prices down," Roberts added.

"We can see the early signs of customers being a bit more cautious, watching every penny, every pound."

In its strategy, Sainsbury’s said it is aware that “the current cost of living situation is challenging for everyone and we are relentlessly focused on delivering consistent long-term value by offering customers great quality, tasty food at low prices.

“As a result of being bold in our cost savings plan, we are able to drive investment back into lower food prices and we are consistently inflating behind competitors on the products customers buy most often – including milk, eggs, potatoes, bread, vegetables, fish and meat.”

The supermarket also said its Price Lock promotion fixed the price of up to 2,000 items for a minimum of at least eight weeks. “Customers can be assured that prices will not rise on those products, helping them to plan and budget.,” it added.

However, Sainsbury said it expects underlying profit in the current year to be below analyst forecasts amid “significant external pressures and uncertainties” including cost inflation and a squeeze on household incomes.

“The year ahead will be impacted by significant external pressures and uncertainties, including higher operating cost inflation and cost of living pressures impacting customers' disposable incomes,” the grocer said.

Read more: Cost of living crisis: Six in 10 cutting back on essentials to make ends meet

Non-food sales were hit hard by difficulties with supply chains, with general merchandise sales falling 4.6%, but grocery sales were up 7.6% as the supermarket continued to benefit from the pandemic that saw restaurants closed. Overall, sales were up 2.9% to £29.9bn.

The supermarket’s board proposed a final dividend of 9.9 pence per share, bringing the full-year dividend to 13.1 pence per share, a 24% increase.

Watch: How to save money on a low income

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