Sainsbury’s says shoppers are delaying spending in run-up to budget | J Sainsbury

The boss of Sainsbury’s has urged Rachel Reeves not to fuel inflation with tax increases on retailers and their suppliers, saying customers are delaying spending as she approaches her budget towards the end of this month.

Simon Roberts, chief executive of Britain’s second-largest supermarket, which also owns Argos and Habitat, said customers “will be cautious about discretionary spending, at least because of the uncertainty.” [household] budgets are tight.”

He said Argos launched its deals for the Black Friday promotional event early last year to attract shoppers as it saw “some lagging spending” as households waited to see whether they would have to pay more tax.

Roberts said it was not clear whether food price inflation had reached its peak, adding: “Inflationary pressures on the cost base have been significant this year… What we do not want to see [in the budget] These are additional effects that may cause further inflation.

“Nobody wants inflation to rise even further”

He noted a £140 million increase in national insurance costs for the retailer’s employers and new regulation costs on packaging, which he said amounted to “tens of millions of pounds” and said: “We’ve had to work really hard as an industry and a business at Sainsbury’s to cover these costs.”

He said retailers were pressing their case to avoid additional business rates at department stores that would affect many supermarkets.

Roberts talked about the government’s tax plans and revealed Sainsbury’s will open one supermarket a month over the next 18 months – the biggest expansion in more than a decade – boosting annual profit hopes to over £1bn.

Analysts from Sainsbury’s broker Shore Capital said they had raised their profit expectations by £20 million to £1.02 billion.

The company also said it would pay a special dividend of £250 million to shareholders after proceeds from the sale of its bank came in at more than £400 million, above expectations. It also said it would spend a further £150 million to buy back shares, another way of returning funds to investors.

Asked why he suggested new taxes could increase inflation while paying out more than £400 million to shareholders, Roberts said Sainsbury’s had invested £1 billion in the last five years to keep prices low for shoppers and £500 million to increase employees’ wages. “This is about making sure we get the equation right for all of our stakeholders,” he said.

The UK’s second-largest grocer said it had increased its market share, with sales rising 4.8% to £15.6bn in the six months to September 13, driven by a 5.2% increase in grocery sales, despite what it described as a “highly competitive market”.

Pre-tax profit rose 5% in the half year to £271 million, following one-off costs of £69 million, mostly related to restructuring at retail stores, including the closure of cafes and deli counters.

The company said it opened six supermarkets in the first half of the year and will open six more by the end of March and 12 more the following year, making it its biggest investment in new stores in the last decade. It also plans to open 30 markets by March and 28 markets the following year.

Sainsbury’s bought 13 former Homebase stores in 2024, followed by a string of Co-op stores.

Roberts said: “Our offering has never been stronger. So while we expect the market to remain extremely competitive, the momentum we have going into Christmas gives us real confidence and we have strengthened our profit target today.”

The figures show an increase in the pace of grocery sales in the second quarter as inflation rose and Sainsbury’s gained market share, but sales growth at Argos slowed.

Sainsbury’s said Argos’ performance was strong as a result of the hot summer months and efforts to improve service and prices, but sales figures in the second quarter were higher than during a very busy period last year when it discounted heavily to clear stock after a cold summer.