Sainsbury's chief executive Simon Roberts has called on the UK government to help ease the rising cost of energy for farmers, food producers, and retailers, warning that the conflict in the Middle East could lead to further price increases.
Roberts: Energy Support Should Cover Food Sector
Speaking about the impact of the Iran war on business costs, Roberts said the single most important step the government could take to keep prices down is to ensure that energy prices for the industry do not rise faster. He noted that while the chancellor recently expanded support for energy-intensive businesses, the food sector—including growing, manufacturing, and retailing—should also be considered for similar relief.
Roberts acknowledged that Sainsbury's has not yet experienced food availability issues, partly because the UK is entering its home-growing season. However, he highlighted that producing food during this period requires significant energy, including heating polytunnels for fruit and salad vegetables, higher fuel costs for transport, and running refrigerators. "There is no doubt pressure on inflation and pressure on food prices given that energy is the single key component on food we eat every day," he said.
Profit Warning Amid Conflict Uncertainty
Sainsbury's shares fell nearly 5% on Thursday after the company warned that profits could decline this year due to the Middle East conflict squeezing customer budgets and increasing business costs. The supermarket group stated that the war "will impact both our customers and our business," but the extent remains unclear.
For the year ending 28 February, Sainsbury's reported a 1.1% rise in annual underlying profits to £1.03 billion, aided by ending losses from its financial services arm. However, the company now forecasts underlying profits between £975 million and £1.08 billion for the current year, reflecting uncertainty over the war's impact. "The duration and extent of these impacts is very uncertain, and this is reflected in our profit guidance," it said.
Roberts added: "The conflict in the Middle East means customers are even more focused on the cost of living, and we are absolutely committed to making sure everyone gets the best possible value when they shop with us."
WH Smith Also Affected
The impact of the Iran war on retailers was also evident at WH Smith, which cut its profit forecast by about £10 million to £90-£105 million, citing uncertainty from the conflict and its effect on passenger numbers and consumer confidence.
Sainsbury's Performance and Investments
Sainsbury's, which also owns Argos and Habitat, increased annual sales by 4.3% to nearly £30 billion. Argos sales rose only 0.7%, as the group faced a highly competitive general merchandise market with pricing pressure and higher participation in lower-ticket items.
The supermarket group said it had gained its highest market share in a decade by investing in keeping prices down despite cost inflation. Roberts explained: "Rather than pass through the full extent of cost inflation, we invested to sustain the strength of our competitive position while also refreshing stores, improving digital experiences, and increasing colleague pay by 5%."
Sainsbury's is also increasing its use of robots and automation in warehouses for both Sainsbury's and Argos, and has launched an "AI centre of excellence" to promote technology adoption across the business, including customer service and supply chain operations.
The company expects to open 10 new supermarkets and 20 new convenience stores this year, following 10 supermarkets and 33 convenience stores opened last year.
