Sainsbury's boss warns cost-of-living squeeze to intensify: £500m pledged to lower prices

Sainsbury’s chief executive has warned that pressure on household budgets “will only intensify over the remainder of the year” as he pledged to invest more money to improve value for shoppers.

Simon Roberts said the supermarket giant is working to reduce costs across its operations amid continued inflation.

“We really understand how hard it is for millions of households right now and that’s why we are investing £500 million and doing everything we can to keep our prices low, especially on the products customers buy most often,” he said.

“The pressure on household budgets will only intensify over the remainder of the year and I am very clear that doing the right thing for our customers and colleagues will remain at the very top of our agenda.”

His comments came as the group, which also owns Argos, revealed that like-for-like sales, excluding fuel, declined by 4 per cent over the 16 weeks to June 25, compared with the same period last year.

Sainsbury’s hailed a “good” performance in its grocery business, where sales dipped 2.4 per cent against levels from last year, which had benefited from pandemic restrictions on other parts of the retail sector.

The group said its “improved value position” has helped its performance against competitors, with the group investing heavily into improving prices, such as through its Sainsbury’s Quality, Aldi Price Match campaign.

Sales were also particularly strong around the Jubilee week, with sales of beers, wines and spirits at “the highest ever outside of Christmas and Easter, with Pimm’s, sparkling wine and champagne selling particularly well”.

Shoppers queue outside a branch of Sainsbury's during the first lockdown in March 2020. Picture: Dan Mullan/Getty Images

The total sales decline was dragged lower by significant slumps in the group’s clothing and general merchandise divisions, which includes its Argos brand.

Argos sales fell by 10.5 per cent over the period, which it said was driven by a heavy slump over the first five weeks.

The group also revealed that fuel sales jumped 48.3 per cent over the period, driven by the surging price of both petrol and diesel. Retailer margins on fuel sales tend to be slim.

Roberts added: “We're working hard to reduce costs right across the business so that we can keep investing in these areas that customers care most about. The progress we are making on improving value, quality, innovation and service is reflected in our improved grocery volume market share.”

Matt Britzman, equity analyst at investment platform Hargreaves Lansdown, said: “It’s full steam ahead on the strategy of offering the best value around. Cost cuts are on the cards to help pay for that, but there’s a limit as to how much fat can be trimmed.

“If costs keep rising, margins will feel the effect and it wouldn’t be a surprise to see profit guidance come under pressure again at some point this year.”

Adam Vettese, analyst at social investment network eToro, noted: “The cost-of-living crisis means that supermarkets are also having to compete even harder to maintain low prices, which Sainsbury’s says will cost it in the region of £500m by the end of March 2023. Until this crisis ends, we will see constant pressure applied to supermarket margins.”