RISING prices and fears of a consumer spending downturn are set to be key themes when supermarkets Sainsbury’s and Morrisons report figures next week.
Under-pressure food sales will be in sharp focus when Sainsbury’s kicks off with its full-year figures on Wednesday.
The Big Four chain revealed a 0.5 per cent fall in like-for-like sales, excluding fuel, in its fourth quarter to March 11, down from a rise of 0.1 per cent in the previous three months.
While it said sales would have risen by 0.1 per cent had it not been for the later Mother’s Day and Easter this year, the group warned of “very competitive” trading and price pressures from the weak pound.
Overall sales were boosted by a robust performance from Sainsbury’s recently acquired Argos chain, which notched up a 4.3 per cent rise in like-for-like sales over the nine weeks. That helped lift group-wide comparable sales into positive territory, up 0.3 per cent in the fourth quarter.
Annual profits will include six months of trading from the Argos business, taken over alongside Habitat when Sainsbury’s acquired Home Retail for £1.4 billion last year.
Analysts are pencilling in underlying annual pre-tax profits of £578 million, including Argos, but experts at Jefferies said their forecasts point to a 15 per cent decline in earnings over the second half with Argos stripped out.
Sales at Sainsbury’s have lagged behind those of rivals such as Tesco and Morrisons in recent months, with the most recent Nielsen supermarket figures showing its share of the sector falling 0.4 per cent to 15.4 per cent in the 12 weeks to March 25.
There are also worries the Argos acquisition leaves Sainsbury’s exposed to a possible consumer spending downturn sparked by the weak pound’s impact on prices.
Meanwhile, Morrisons is expected to report steady sales growth when it releases first quarter results on Thursday, despite facing industry pressures including rising food prices linked to the post-Brexit-vote collapse of the pound.
Like-for-like sales growth is expected to reach 1.7 per cent in the first quarter, according to Jefferies, while Shore Capital is forecasting an increase of between 1.75 per cent and two per cent over the period.
Analysts say Morrisons is in a better position to handle a tougher trading environment than its peers, with retailers widely expected to suffer as shoppers rein in spending amid rising inflation.
Food prices have already started to rise on supermarket shelves as producers pass on soaring import costs. The Office for National Statistics (ONS) reported a 1.4 per cent drop in retail sales over the three months to March, marking the biggest quarterly fall in seven years.
Morrisons earlier this year reported its a 49.8 per cent jump in pre-tax profits to £325m while revenue rose 1.2 per cent to £16.3bn, solidifying the chain’s return to form under CEO David Potts.
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