Inflation hits Sainsbury's profits

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The retailer said wage inflation had hit profits. (Source: Getty)

Sainsbury's said like-for-like sales had risen in the third quarter, but profits were hit by wage inflation.

The figures

Like for like sales (excluding fuel) rose 1.6 per cent in the 28 weeks to the 23 September, the retailer said today, with underlying group sales rising 17 per cent to £16.3bn.

But underlying pre-tax profits fell nine per cent to £251m as wages and its consolidation with Argos took their toll.

Basic earnings per share more than halved from 14.8p during the same period last year to 7.1p this year, while it cut its dividend by 14 per cent to 3.1p.

Shares fell 2.4 per cent to 227.9p in mid-morning trading.

Read more: Vinyl countdown: Sainsbury's has launched its own record label

Why it's interesting

With inflation down and wage growth (relatively) low, retailers are being hit where it hurts as consumer confidence falls. 

Sainsbury's said it is doing what it can: it has "updated and improved" 70 of its food ranges and jazzed up 15 per cent of its supermarkets. 

Its online offering is also doing well, with sales growing seven per cent, while sales at its convenience offerings grew eight per cent. 

Sainsbury's is also still dealing with the aftermath of its acquisition of Home Retail Group, the parent company of Argos, in 2016. The retailer said it now has 112 Argos stores open in Sainsbury's supermarkets, and will have 165 open by Christmas, as well as nearly 200 digital collection points.

But while it reiterated its expectations for the full year, it added that the market remains "competitive".

Read more: Sainsbury's to cut 2,000 jobs as it seeks £500m in cost savings

What Sainsbury's said

Chief executive Mike Coupe said:

We have delivered a good performance across the Group in the last six months, with more customers choosing to shop at Sainsbury's in the first half than ever before. We are now three years into delivering our differentiated strategy and are seeing clear results.

We continue to focus on offering our customers great value, supported by our removal of multibuys. Customers can shop at Sainsbury's knowing they get good value every day without having to wait for products to be on promotion. We are also collaborating with suppliers and working hard within our own business to reduce our costs and limit the impact of price inflation on our customers.