LONDON — After reporting a 4% drop in underlying quarterly sales, which was caused by a drop in demand for general goods in its supermarkets and Argos stores, Sainsbury’s said that the financial pressure on British shoppers would “only get worse” this year.
With inflation at a 40-year high and rising and people cutting back on spending, Britain’s second largest supermarket said sales of food, drinks, and household goods fell 2.4% in the 16 weeks leading up to June 25, while sales of general merchandise fell 11.2%.
CEO Simon Roberts said that Sainsbury’s knew how hard things were for a lot of families right now.
“The pressure on household budgets will only get worse for the rest of the year,” he said on Tuesday. “Doing the right thing for our customers and colleagues will remain at the top of our list.”
He said that Sainsbury’s prices weren’t going up as fast as those of its competitors. This was helped by a plan to match Aldi’s prices on 240 products, including the 20 that customers bought the most.
The results were about what was expected after market leader Tesco warned in June that Brits were buying less and switching to cheaper products. Its underlying sales went down by 1.5%, while those of its smaller competitor Morrisons went down by 6.4%.
Roberts said that shoppers were buying more own-brand products to save money, but they were also buying more expensive brands for special events like the recent party to celebrate Queen Elizabeth’s 70 years in power.
Shares of Sainsbury’s, which have dropped 25% in the last year, were up 1.3% as the company stuck to its guidance.
As the cost of living goes up, British households are having a harder time making ends meet.
Wages aren’t going up fast enough to keep up with inflation, which hit 9.1% in May and is heading toward 10%. Some predictions say that food prices will go up by 15 percent this summer and 20 percent early next year.
Roberts said that customers were getting a better idea of how valuable Sainsbury’s was.
But because Argos is a separate brand, more of its sales come from general merchandise than those of its competitors. This makes it more vulnerable to pressure on consumers’ disposable income.
When compared to a partial lockdown last year, the drop in general merchandise was steeper in the first part of the quarter. However, the drop has continued in recent weeks, and “big ticket” items are having a hard time.
In 2021-22, Sainsbury’s still expects to make between 630 million pounds and 690 million pounds, which is less than the 730 million pounds it made in 2020-21.
The company also said that Kevin O’Byrne, who is the chief financial officer, will retire in March 2023. He will be replaced by Blathnaid Bergin, who is the director of commercial and retail finance.