Food prices are not rising as fast as they were, according to the boss of Sainsbury's, but relatively high grocery inflation is set to persist until at least the end of this year.
The UK's second-largest supermarket retailer, which also owns Argos, reported a better-than-expected 9.6% increase in like-for-like group sales during the 16 weeks to June 24 which was driven by an 11% jump in grocery revenues. Sainsbury's chief executive Simon Roberts said shoppers are putting more items in their baskets as the group has ploughed roughly £60m since March into cutting the prices of basics such as milk, pasta, and toilet roll.
He added that Sainsbury's customers are only experiencing about half the rate of price increases indicated by figures from the Office for National Statistics which show that although food and drink inflation fell back to 18.3% in May, it still remains among the fastest rates in decades. Latest industry data indicates that food and drink inflation stood at 14.6% in June.
READ MORE: Sainsbury's: Too soon to claim victory in war on inflation
The grocery giants that put 99% of food on the nation's tables have come under fire recently amid accusations of profiteering. The competition watchdog is currently investigating whether supermarkets are keeping shelf prices higher than they need to be, while a separate probe into fuel prices found earlier this week that the big grocery chains failed to pass on savings to motorists in line with falling commodity prices.
Mr Roberts said the group is putting "all of our energy and focus into battling inflation" as household budgets are "under more pressure than ever". This has included cutting prices on more than 120 essentials such as bread and butter, £90m in savings via the April launch of the Nectar Prices loyalty scheme, the expansion of the value range of Stamford Street products, and its continuing Aldi price match campaign.
"Customers can see that prices at Sainsbury's have improved and this combination of great value and some good weather in recent weeks means we have grown our food volumes and market share," he said. "Customers are choosing us when they want to celebrate and we grew ahead of the market over Easter, the Coronation and the bank holidays."
READ MORE: Higher food prices 'baked in' as shoppers seek inflationary relief
Though food inflation is "starting to fall", Mr Roberts agreed with recent comments by Tesco boss Ken Murphy that prices will not return to levels seen before the start of Covid pandemic. This is due to the "locked in" nature of higher wages for retailing and food production workers, and stubbornly high energy prices.
He added that relatively high food inflation will continue until at least the end of this year, with inflation on packaged goods taking longer to fall than that for fresh foods.
"We've seen in those products where the prices went up first, and that was predominantly in fresh food, we've seen prices start to come down," Mr Roberts said, highlighting milk prices. "The packaged products just takes longer to feed through the system and so those products will be a bit more stubborn."
READ MORE: Food price caps are gimmickry of the highest order
The 11% increase in grocery sales was driven mainly by volume increases meaning that shoppers were buying more goods, rather than paying higher prices for less. General merchandise sales were up by 4%.
The group, which has a 15% share of the UK grocery market, maintained its forecast for a full-year underlying pre-tax profit of between £640m and £700m. That compares to £690m for the year to March 4.
Emma-Lou Montgomery, associate director at Fidelity, said the group's various initiatives have been successful in a price-sensitive market.
"It will be more telling to see if there is any shift in the ranking of the big four [supermarkets] once food inflation does subside, and we get a sense of whether customers really felt cost-savings were for their benefit, or just part of the battle for profits and market share that has been playing out between these big supermarket chains for years now," she added.
Shares in Sainsbury's closed yesterday's trading 1.8% lower, down 5p at 269.6p.
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