Supermarket group Sainsbury's has followed market leader Tesco in warning of lower profit for the current year due to soaring inflation, taking the shine off a more than doubling in profit for its 2021-22 year.
Sainsbury's said on Thursday its underlying profit before tax in 2022-23 was expected to be between £630 million (€751.2 million) and £690 million (€822.8 million).
The group made underlying profit before tax of £730 million (€870.5 million) in the year to March 5, 2022 while analysts on average had been expecting £703 million for 2022-23.
"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," said chief executive Simon Roberts.
Cost Of Living Crisis
Already this month, Tesco, Morrisons and the Co-operative Group have all warned on the outlook for the coming year, as a cost of living crisis and supply disruption due to the war in Ukraine weigh on the grocery sector.
Surging prices are causing the biggest squeeze on UK household incomes since at least the 1950s and consumer confidence is at near record lows.
Analysts see Sainsbury's as more challenged than other supermarket groups because of its ownership of the Argos general merchandise business – a sub-sector more exposed to pressure on consumers' disposable income.
Sainsbury's revenue rose 2.9% to £29.9 billion (€35.6 billion) in 2021-22. Like-for-like sales, excluding fuel, fell 2.3%. They fell 5.6% in the fourth quarter, having fallen 4.5% in the third quarter.
“In a year of unprecedented change we have been relentlessly focused on putting customers and colleagues first while delivering the first year of our plan to put food back at the heart of Sainsbury’s," Roberts added.
"We said we would invest in value, innovation and service and that’s exactly what we’re doing. We have outperformed key competitors on both a one and two-year basis while also delivering strong underlying profit growth, improved returns and consistent retail free cash flow. This gives us a strong foundation to keep building momentum in the year ahead."
Sainsbury's announced last month that it planned to close 200 in-store cafés across its estate.