The boss of Sainsbury’s has called on the government to help ease the rising cost of energy for farmers, food producers and retailers caused by the conflict in the Middle East to prevent further price rises.
Simon Roberts, the chief executive of the UK’s second largest grocer, said: “The single biggest thing the government could do to keep prices down is to make sure energy prices for the industry are not rising faster.”
Referring to the expansion of support on bills for energy-intensive UK businesses announced by the chancellor last week, Roberts said: “Some sectors have seen those reliefs and it is now time to look at what’s possible in food [growing], manufacturing and retailing.”
He said Sainsbury’s had not yet had problems with the availability of food, and that was being helped by the UK entering the season in which more food is home-grown. The growing season is in full swing in the UK but that takes a lot of energy to produce,” he said, highlighting the cost of heating polytunnels to produce fruit and salad vegetables, higher fuel costs to transport food from farms to shops, and the cost of running refrigerators.
“There is no doubt pressure on inflation and pressure on food prices given that energy is the single key component on food we eat every day,” he said.
Shares in Sainsbury’s slid almost 5% on Thursday as the company warned that profits could fall this year as the conflict in the Middle East squeezes customers’ budgets and pushes up business costs.
The supermarket group said the conflict “will impact both our customers and our business” and it was unclear how large the effect would be.
The company reported a 1.1% increase in annual underlying profits for the year to 28 February – just as the US-Israeli attacks on Iran began – at £1.03bn, helped by ending losses from its financial services arm.
Sainsbury’s said uncertainty over the war meant it was unclear whether profits would be marginally higher or lower than its last financial year. It predicted it would make an underlying profit of £975m to £1.08bn.
“The duration and extent of these impacts is very uncertain and this is reflected in our profit guidance,” it said.
Roberts said: “The conflict in the Middle East means customers are even more focused on the cost of living, and we are absolutely committed to making sure everyone gets the best possible value when they shop with us.”
The impact of the Iran war on retailers was also evident at WH Smith. On Thursday the company – which has stores in airports and railway stations – cut its profit forecast for the year ahead by about £10m to £90m-£105m “in light of the uncertainty arising from the conflict in the Middle East” and “reflecting the impact on passenger numbers and weaker consumer confidence”.
Sainsbury’s, which also owns Argos and Habitat, increased annual sales by 4.3% to almost £30bn.
Sales at Argos rose only 0.7% as the group said it faced “a highly competitive and subdued general merchandise market; volume growth was largely offset by pricing pressure and higher participation of lower-ticket items”.
The supermarket group said it had gained the highest market share in a decade as it had invested in keeping prices down despite cost inflation.
Roberts said: “Rather than pass through the full extent of cost inflation, we invested to sustain the strength of our competitive position while also refreshing stores, improving digital experiences and increasing colleague pay by 5%.”
The group is using more robots and automation in warehouses for Sainsbury’s and Argos and has launched an “AI centre of excellence” to promote adoption of the technology across the business, including in customer service and the supply chain.
Sainsbury’s said it expected to open 10 new supermarkets this year and 20 new convenience stores. It opened 10 supermarkets and 33 convenience stores last year.
