Supermarkets had a total of more than £1bn chipped off their market value on Wednesday, after a warning over inflationary pressures from Tesco.
Grocers including Ocado and Sainsbury’s suffered poor performances on Wednesday, after Tesco warned that profit could be hammered by rising costs and shifts in shoppers’ behaviour.
Ocado took a hit on the FTSE 100, with shares closing down 2.6 per cent in Wednesday trading, while Sainsbury’s was also down 2.5 per cent and Mark’s and Spencer’s dropped 2.1 per cent.
Tesco warned it was under pressure to “keep the cost of the weekly shop in check” as it widened its profit guidance for the year ahead.
The UK’s largest supermarket said profit more than trebled last year, posting a pre-tax profit of £.203bn, powered by a six per cent rise in revenue.
With “significant uncertainties in the external environment,” the supermarket said it would provide a wider range of profit guidance than usual.
Guidance for the 2022/23 financial year was for retail adjusted operating profit of between £2.4bn and £2.6bn.
The Consumer Price Index (CPI) hit seven per cent for March, according to the Office for National Statistics yesterday, surpassing analysts’ forecasts and nearing a historic high of 7.1 per cent.
Murphy told reporters on Wednesday morning that customers were already “planning changes to how they shop” and had started “looking really critically at where they spend their money.”
Own brand products would “play an important role” in the shift in consumer behaviour, the supermarket boss added.
However, he cautioned that it was still “early days” with customers only just having to pay hiked energy bills this month and more cost hikes to come this spring. The supermarket boss said some changes were related to lockdown restrictions easing, with shoppers returning to offices and dining out more.