Sainsbury’s to shed light on consumer sentiment and food prices

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Consumer sentiment and the outlook for food inflation are set to be in the spotlight as supermarket giant Sainsbury’s updates investors next week.

The retailer is expected to deliver further growth when it provides a first quarter trading update on Tuesday June 30.

In its previous update in April, the retailer said it made a “positive start” to the new financial year which began in March.

The group said grocery volumes were growing ahead of the wider UK market, amid a continued focus on price and value in order to get more customers through its doors.

Sainsbury’s also owns the Argos brand (Owen Humphreys/PA) (PA Wire)

However, a raft of competitors, including largest rival Tesco, have seen a slowdown in revenue growth in recent months amid cautious consumer activity.

Last week, bosses at Tesco said sentiment among shoppers has been impacted by the conflict in the Middle East but stressed the war has not yet led to higher prices.

Investors will, therefore, be keen to hear how its consumers are faring and what the group’s strategy has been to maintain sales growth.

Sainsbury’s is also likely to update investors on how the conflict in the Middle East is impacting prices.

Fuel prices are starting to cool after the conflict caused them to spike, while food inflation has also remained steady despite warnings that it could jump because of rising energy costs.

The ONS most recently reported food and drink inflation of 2.2% in April, but IGD (Industry of Grocery Distribution) has warned that this could still peak at around 5.5% later this year as more costs feed into suppliers.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “The UK food market is proving resilient overall, and Sainsbury is executing well on its plan to put food first, which should see grocery sales trend higher.

“But the group’s overexposure to general merchandise through its ownership of Argos is likely to hold back progress.

“Cost pressures remain a threat to monitor, but inflation has been surprisingly stable, and no changes are expected to full-year guidance yet.”

In April, Sainsbury’s also received a tepid response from shareholders after indicating that profits were likely to remain roughly steady in the current financial year.

Shares have slipped steadily in recent months amid worries about the uncertain consumer backdrop, falling to their lowest level since last September earlier this month.

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