Sainsbury’s reveals dip in profits as it swallowed some of the impact of rising costs

The company, which also owns Argos, said underlying pre-tax profit declined by 8 per cent to £340m over the half-year to September 17, compared with the same period last year.

The retailer also revealed that sales moved higher over the period as it was buoyed by a stronger second quarter.

Simon Roberts, the chief executive of J Sainsbury plc, said: “Two years ago we launched our plan to put food back at the heart of Sainsbury’s. We committed to improve shareholder returns by creating a simpler business and reducing costs to invest in lower prices, food innovation and maintaining colleague and customer satisfaction.

"We have grown market share in both grocery and general merchandise and investment in our stores and colleagues is supporting leading supermarket customer satisfaction and availability.

"Profits are significantly higher than pre-Covid levels and we are generating strong cash flow, supporting debt reduction and dividend payments.

He added: “We really get how tough it is for millions of households right now. Customers are watching every penny and every pound and we know that they are relying on us to keep food prices as low as we can.

"We will have invested more than £500m by March 2023 in keeping prices lower by cutting our costs at a faster rate than our competitors, meaning we have more firepower to battle inflation.

"Over the past year and a half we have consistently passed on less price inflation than our competitors and I am confident we have never been better value. Argos is also performing well in a market where customers are looking for reassurance that they are getting great value and availability.

“We were the first supermarket to give our colleagues a second pay rise this year and have invested £150m to support them and drive outstanding service.

"I want to thank all my colleagues for their hard work and dedication and for everything they are doing to deliver for our customers. Our strong results are testament to the outstanding commitment and contribution from every member of our team.”

Charlie Huggins, Head of Equities at Wealth Club, commented: "These are solid enough results from Sainsbury's, but it is difficult to get excited. It’s just such a tough industry, with fierce competition, fickle consumers and thin margins.

“UK grocery shoppers have abundant choice – from premium shops like Waitrose, Ocado and M&S to Asda, Aldi and Lidl at the other end. In the middle is Sainsbury's. It does its job perfectly well but isn’t perceived as the cheapest or the best. This makes for a tough gig, especially in an inflationary environment.

Mr Huggins added: "To be fair to Sainsbury's, it isn’t taking this lying down. It has lowered prices and significantly increased online capacity. But all this comes at a cost. With the economy being strangled by higher interest rates and inflation, Sainsbury’s will have to run very hard just to stand still."