Retail

Sainsbury's Tipped To Trim Profit Forecast As UK Shoppers Struggle

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Britain's second biggest supermarket group, Sainsbury's looks likely to follow market leader Tesco and lower its full-year profit sights when it reports half-year results next week, analysts' forecasts indicate.

At a first quarter trading update in July, Sainsbury's kept its forecast for underlying profit before tax of between £630 million and £690 million (€726.7-€795.9 million) for the year to March 2023, down from the £730 million (€842 million) made in 2021-22.

However, according to analysts' forecasts published on the Sainsbury's website, which was updated on 6 October, the average estimate is £637 million, with the highest at £655 million.

Sainsbury's house broker Shore Capital is forecasting £636 million (€733.6 million). It notes that with UK consumers facing higher food and energy costs in the second half demand is likely to remain weak.

A Sainsbury's spokesperson declined to comment on its guidance.

Elsewhere, Tesco lowered its profit sights earlier this month and its shares are down 27% so far this year. Sainsbury's shares are down 30%.

Impact Of Inflation

UK consumers have been reining in spending with inflation hitting 10% and they face the prospect of a tighter squeeze in 2023 after finance minister Jeremy Hunt scrapped tax cuts previously planned by former Prime Minister Liz Truss and scaled back her vast energy support scheme for households.

A survey published this month showed UK consumer confidence remained close to a record low as households responded to the combination of high inflation and chaotic politics.

Analysts see Sainsbury's as more challenged than other supermarket groups because it owns the Argos general merchandise business – an area more exposed to cutbacks in discretionary spending.

Earlier this month, Shore Capital cut its profit estimate for the 2023-24 year by 5% to £636 million (€733.6 million), so a flat year-on-year outcome.

Sainsbury's will publish first half results on 3 November.

News by Reuters, edited by ESM. For more retail news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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