SAINSBURY’S yesterday reported a 17.5 per cent rise in pre-tax profits but warned that a sudden VAT hike from the new government could strangle the high street recovery.
The company saw profits of £610m for the year to 20 March – £10m ahead of what was expected by the City.
But chief executive Justin King said he feared a rise in VAT to 20 per cent in an already tough economic environment.
Under Labour it was cut to 15 per cent for 13 months in a bid to kick start consumer spending.
King said: “A VAT rise to 20 per cent is clearly on the government’s mind. What we would say is we need to know in good time and would say that there needs to be sensible timing and not in our key trading periods such as the run up to and in the aftermath of Christmas.”
Meanwhile, thousands of Sainsbury’s staff will share a record bonus pot of £80m. Workers will bank an average bonus of £620, up from £500 last year.
Details of King’s payout will be revealed in the group’s annual report.
He said staff had been rewarded for a “good performance in difficult trading times”, but warned of further challenges ahead with consumers “under pressure”.
Sainsbury’s is now serving 19m customers a week – one million more than a year earlier and nearly five million more than five years ago. Total revenues across the group were up five per cent to £21.4bn, the figures revealed.
The group opened 38 new supermarkets last year and has identified convenience stores as a key area of growth.
Sainsbury’s is growing non-food sales at three times the rate of food.
The company also said it would inject more money into its pension scheme after a valuation showed a deficit of £1.2bn as of March 2009.
It has set up a property scheme to help fund its pension to avoid locking in larger cash payments.
Sainsbury’s shares rose 3.2 per cent to 338.5p following the figures.