Supermarket Sainsbury’s has cautioned over “challenging” trading and ongoing price pressures as it posted an 8.2 per cent fall in annual profits.
The chain reported pre-tax profits of £503m for the year to March 11, down from £548m the previous year.
Profits fell 1 per cent on an underlying basis to £581m as it sought to keep prices low amid cost pressures from the Brexit-hit pound, which offset a £77m boost from the recently bought Argos chain.
The group said the market remains “competitive and the impact of cost price pressures remains uncertain”, with like-for-like supermarket sales down 0.6 per cent over the year.
But Sainsbury’s chief executive Mike Coupe said its food business remained “resilient in a challenging market”.
He added: “This has been a pivotal year and we have made significant progress delivering and accelerating our strategy.”
Group sales, including VAT, surged 12.7 per cent thanks to a robust contribution over the final six months from the Argos business, which the group bought when it acquired Home Retail for £1.4bn last year.
Sainsbury’s said it made cost savings of £130m as part of a three-year target to cut £500m by the end of 2017/18.
It also outlined aims to slash costs by another £500m in the next three years.
Mr Coupe said the group was “pleased” with its progress so far since snapping up Argos, having already opened 59 Argos Digital stores in its supermarkets, which it said were performing well.
It is also ramping up plans to open 250 Argos Digital stores, the group added.
Phil Dorrell, partner at Retail Remendy, said: “Sainsburys has reported growth in all categories except it’s core supermarket offer. Should this worry stakeholders though? If customer’s shopping habits are shifting away from that format, Sainsburys should move with them.
“For the time being, lost sales and profit from Sainsburys’ supermarket format is being made up in other areas, which in part, fulfil’s it’s commitment to shareholders.
“It is the long term share value that we need convincing on. If we were Coupe we would be very conscious that for all the ambitious plans in developing general merchandise, Sainsburys core proposition is food retailing. Sushi and patisserie does not fill a family’s fridge.”