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Sainsbury’s: battling inflationary forces
Sainsbury’s peers are reporting higher sales. Next reported last week that profits for the full-year would be better than previously forecast due to an unexpected boost from April wage increases and the warmer weather. Sainsbury’s rival Tesco also recently unveiled an 8% increase in its first-quarter results, but warned that although it believed “peak inflation” had eased, high labour costs would continue to be a challenge for UK firms.
At the full-year results in April, Sainsbury’s said that at this “early stage of the year” it expected underlying profit before tax of between £640 million and £700 million for the full-year 2023/24 and that it would generate at least £500 million of retail free cash flow.
Pre-tax profits for the year to 2023 more than halved to £323 million from £854 million in 2022, mostly due to non-cash impairment items as well as higher discounting on profits. However, underlying profits fell to £690 million from £730 million the previous year. The company says it has also succeeded in making its Tu clothing brand, financial arm, Argos and Habitat more profitable, as well as cutting £900 million of costs out of the business.
Embarrassingly for its brand, Argos was recently named and shamed by the government, along with WH Smith and other companies, as having been fined for failing to pay some of its staff the minimum wage.
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