Sainsbury’s has warned over “challenging” trading and ongoing price pressures as it recorded a fall in profits and rise in sales in its annual report.
The grocery retailer reported pre-tax profits of £503 million in its preliminary report for the year to March 11, an 8.2 per cent drop down from the £548 million recorded in the previous year.
On an underlying basis, profits dipped by one per cent from £587 million to £581 million as it kept prices low despite cost pressures from the Brexit-hit pound, which offset a £77 million boost from the recently-acquired Home Retail Group.
The figures mark the third year of falling underlying annual profits and Sainsbury’s added that the market remained “competitive and the impact of cost price pressures remains uncertain”, with like-for-like supermarket sales down 0.6 per cent over the year.
However, the company’s overall sales jumped by 12.7 per cent, buoyed by Argos’ contribution during the final six months, which Sainsbury’s bought when it acquired Home Retail Group for £1.4 billion last year.
Meanwhile, Sainsbury’s convenience store sales were up six per cent and online groceries lifted eight per cent, but supermarkets saw a decline of two per cent.
Despite the fall in profits, Sainsbury’s chief executive Mike Coupe said its food business remained “resilient in a challenging market” and he was “pleased” with the company’s performance since snapping up Home Retail.
“This has been a pivotal year and we have made significant progress delivering and accelerating our strategy,” he said.
Sainsbury’s said it made cost savings of £130 million as part of a three-year target to cut £500 million by the end of 2017/18.
It also revealed plans to cut costs by another £500 million in the next three years.
Sainsbury’s has already opened 59 Argos Digital stores in its supermarkets, which it said were performing well, and plans to open another 250.
The company warned it expected cost price inflation of two to three per cent over the financial year ahead, warning over rising prices impacting sales, especially in its general merchandise and clothing arm.