Sainsbury’s boss says food price inflation is starting to slow

Food price inflation is starting to fall which is helping to boost the amount customers are buying, the boss of Sainsbury’s has said.

The supermarket reported that like-for-like sales excluding fuel had jumped 9.8 per cent in the 16 weeks to 24 June. 

Grocery sales performed strongly, with a rise of 11 per cent over the period, boosted by bank holidays and warmer weather, but clothing sales have struggled and are down 3.7 per cent.

Sainsbury’s said changes to its Nectar loyalty scheme have provided ‘strong momentum’. 

In April, the retailer launched Nectar Prices, similar to Tesco’s Clubcard scheme that offers members lower prices, which would be ‘further enhanced’ later this year.’

The retailer said it had put more than £60million into cutting the prices of basics with the introduction of Nectar Prices and its Aldi Price Match campaign.

However, the rise in sales is likely to reignite the debate over food profiteering. The Competition and Markets Authority (CMA) is currently investigating whether competition among supermarkets is working to keep prices down.

Recent figures from the Office for National Statistics (ONS) show food inflation eased slightly in May but is still sticky at 18.4 per cent.

‘We are putting all of our energy and focus into battling inflation so that customers get the very best prices when they shop with us, particularly now as household budgets are under more pressure than ever,’ chief executive Simon Roberts said. 

‘Food inflation is starting to fall and we are fully committed to passing on savings to our customers.’

The comments echo those made by Tesco boss Ken Murphy who last month said there were ‘encouraging’ signs inflation had started to ease.

Roberts added that prices on the supermarket’s 100 most popular products have fallen in the last quarter. Products like bread, butter, milk, pasta, chicken and toilet roll have all seen price cuts since March.

Richard Hunter, head of markets at interactive investor said: ‘Strong retail free cash flow guidance has been maintained, which should augur well for combatting other issues outside the remit of this trading statement, such as the reduction of net debt.

‘The continued cost savings programme will also need to contribute so that the group can continue its investment in pricing.’

Shares fell 1.49 per cent to 270.60p in morning trading but have gained nearly 30 per cent over the last year. This compares to a rise of four per cent for the wider FTSE 100.

Hunter said: ‘Fierce competition is not just limited to the aisles, but also extends to investors. Indeed, the market consensus of the shares as a sell, with Tesco the preferred play in the sector, highlights something of a gulf between the two.

‘It also reaffirms that while there is much to like within this latest release, there is also much to do for Sainsbury to regain anything like its previous share price levels.’