Sainsbury's Slides 3.7% as Sales Growth Slows and Losses Widen

Sainsbury's shares slid 3.7% on Thursday as the UK's second-biggest supermarket reported slower-than-expected sales growth of 2.6% for the six months to 12 September and widened pre-tax losses of £63m.

Chief executive Simon Roberts warned of a "pretty challenging" market in the run-up to Christmas, saying households are "finding it tough" and food producers face rising costs.

What did Roberts want from the budget?

Roberts called on the government not to "further aggravate" pressure on business costs in this month's budget. He said it was "important this government does not repeat what we have seen in previous budgets" in raising business rates and employers' national insurance contributions. "That's been really hard," he said.

After Sainsbury's and other industry leaders met government ministers last week, Roberts said he believed "this government is really listening to business," especially on helping create more jobs for young people.

What happened to sales growth?

Growth almost halved in the second quarter, falling to 1.9% from 3% in the first. Shoppers kept a tight rein on the number of items they bought amid a "focus on the cost of living," Roberts said, and reined in spending on clothing and "big-ticket" items such as furniture at Argos.

• Argos sales fell 1.8%
• General merchandise and clothing sales dropped 3.4% in the half
• Online grocery sales rose 9%
• Sales of the premium own-label Taste the Difference range climbed 6%

The grocery and clothing figures were also dented by comparison with last summer, when Sainsbury's and other retailers got a trade boost after cyber-attacks hit Marks & Spencer and the Co-op.

How deep were the losses?

Pre-tax losses for the half year widened to £63m from £14m a year before. Strip out the Argos catalogue business — now being sold off — and underlying profit rose 5.2% to £366m. The Argos deal is expected to complete in February, with the businesses fully separated by 2029.

Sainsbury's now expects annual underlying profit of at least £1.02bn, up slightly from the £975m previously outlined.

Charles Allen, a senior retail analyst at Bloomberg Intelligence, said the figures suggested Sainsbury's was not expecting to lift profits in the second half against a "tougher competitive backdrop as inflation returns and rivals prioritize sales growth".

What about food prices and supply?

Roberts said food inflation was not "anything like" some of the high levels forecast earlier in the year, but high energy and fertiliser costs could push up food prices next year.

He argued that in a more unsettled global environment the UK needed to "improve food resilience and grow and produce more at home." He called for increased tax breaks supporting investment in farm technology — including irrigation and reservoirs — as the climate crisis is expected to bring more hotter, drier summers like this year's.

Does this fuel merger talk?

Roberts refused to comment on speculation that Sainsbury's is set to buy a rival, amid reports it entered and ended talks to buy Morrisons earlier this year.

The group said it plans to open 10 supermarkets and 25 convenience stores by March — an expansion some analysts said reduces the logic of seeking a merger with a competitor.

With profit guidance nudged up but second-half gains off the table, per Allen's reading, Sainsbury's enters the festive trading period counting on online growth and premium ranges to offset a consumer still watching every pound.