J Sainsbury Plc reported higher sales and said that food inflation is starting to fall, suggesting that the cost-of-living crisis could start to ease for UK shoppers.
(Bloomberg) — J Sainsbury Plc reported higher sales and said that food inflation is starting to fall, suggesting that the cost-of-living crisis could start to ease for UK shoppers.
Retail revenue gained 9.8% at Britain’s second-largest supermarket operator on a like-for-like basis in the company’s first quarter. Sainsbury has spent more than £60 million ($76 million) on lowering prices since March, covering more than 120 basic items like toilet paper, bread and milk.
Supermarkets are under pressure to pass on price cuts to customers wherever possible as grocery inflation remains elevated in the UK.
“Customers are recognizing the scale of what we’ve done to keep prices low,” Chief Executive Officer Simon Roberts said on a call with reporters. “This has driven a return to volume growth.”
The stock fell as much as 2.2%. The shares have gained 24% this year.
Sales growth came not only from higher prices but also from selling more food. Sainsbury said overall profit is on track with previous guidance, indicating earnings may increase this year. Still, the company has to deal with wage inflation, Roberts said.
“The costs of labor and energy are still high,” he said. “Labor costs are not going to come down as they’ve been permanently increased.”
Read More: Tesco Sees Inflation Easing After UK Politicians Target Grocers
Traditional UK grocers are fiercely competing with discounters Aldi and Lidl, which are gaining market share during the cost-of-living crisis. Sainsbury grew more than competitors during Easter, bank holidays and the recent coronation of King Charles III.
The grocer is price-matching discount rival Aldi on more than 300 products and also has grouped its cheapest own-label ranges under a new brand, Stamford Street, to make them more obvious to customers.
Sainsbury has also ramped up its loyalty program, passing on discounts to customers with its Nectar card. Since it started in April the Nectar Prices program has helped customers save more than £90 million.
Sainsbury’s clothing revenue fell 3.7% in the quarter as a cool spring weighed on demand. Sales have improved in the final weeks of the quarter with changes to the weather.
(Updates with CEO comment)
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