Cost of living in focus as Sainsbury’s set to reveal sales rise

Sainsbury’s is expected to provide an insight into the continued trajectory of food inflation in the update on November 2.

Sainsbury’s is to update investors on November 2 (Danny Lawson/PA) (PA Archive)

Bosses at Sainsbury’s are set to shed more light on how shoppers’ budgets are holding up ahead of Christmas in an update to investors next week.

Customer budgets have come under pressure over the past year due to soaring household bills and mortgage costs, while food inflation also rocketed higher.

However, retailers have reported an easing in food and drink prices in recent months.

On Thursday November 2, Sainsbury’s is expected to provide an insight into the continued trajectory of food inflation when it reports its financial results for the half-year to September.

In its previous update in July, chief executive Simon Roberts said inflation was “starting to fall”, so investors will be hoping to see a material impact from this on its operating costs.

The UK’s second-largest supermarket chain has previously said its underlying pre-tax profits for the current year are set to be lower than the £690 million it posted for the previous year.

It indicated it would prioritise improving prices for customers over higher profitability, as it seeks to maintain its market share amid fierce pressure from German discounters Aldi and Lidl.

Darren Shirley and Clive Black, analysts at Shore Capital, said investment into pricing, such as reductions for Nectar card members, is expected to drive an 9.6% rise in grocery sales over the latest quarter.

“We expect Sainsbury’s to have continued to trade well in H1, supported by very good in-store executive and an ever-sharper relative pricing proposition,” they said.

Shareholders will also be keen to hear about further progress in the company’s current cost-saving programme, which was launched to produce £1.3 billion in savings over three years.

Cost-of-living pressures have particularly impacted trade away from essential products, with demand for clothing and big-ticket items appearing weaker.

Sainsbury’s is significantly exposed to these markets through its Argos and Habitat businesses, which could face a key festive period.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “This area could be vulnerable to a steeper slowdown and investors will be monitoring how things have been going.

“That also makes the outlook statement very important – the next trading season is all about Christmas and this will give an indication of how consumer spending is expected to hold up.”