Sainsbury's predicts flat profits as supermarket price war hots up

Sainsbury’s has indicated that profits will be flat over the next year as it faces intensifying competition from rivals on price and a surge in costs.
It came as the UK’s second largest supermarket chain reported that sales and profits grew over the year to March.

The retailer said full-year sales, excluding fuel, rose by 4.2 per cent to £26.6 billion as it increased its share of the UK grocery market.

Meanwhile, retail underlying operating profits rose by 7.2 per cent to £1.03 billion for the year.

It told shareholders that these profits will be about £1 billion for the new financial year as stronger sales volumes are expected to be offset by weaker profitability.

Earlier this month, rival Tesco said it would see weaker profits as it sets more money aside to invest in price cuts.

It comes amid pressure from Asda, the UK’s third largest chain, after its returning boss Allan Leighton said it would slash prices in a bid to turn around its fortunes.

On Thursday, Sainsbury’s said it was growing market share after investing £1 billion in improving its pricing.

The company also said it was launching its “biggest investment in expanding our store space in over a decade”, with about 40 new stores opening this year.

Grocery sales grew by 4.5 per cent for the past year, while sales at its Argos arm slipped by 2.7 per cent to £4.9 billion.

However, the retailer said it has started the new financial year with “good trading momentum” across all its brands after Argos grew in the final quarter.