Sainsbury’s has joined retail’s £1bn profit club – but the grocer does not expect profits to increase again this year. Chief executive Simon Roberts discusses potential price wars, tariff impacts and falling sales at Argos
What is behind the cautious profit guidance?
We’re committed to sustaining the strength of the value position that we’ve built.
We expect our retail operating profit to be around £1bn in the year ahead and we delivered £1.036bn in the year just completed.
We’ve spent the last four years resetting our pricing position and we’ve learned a huge amount as we’ve done that. That means we can really have a look at where the market’s at, where all our competitors are at, and our position.
That leads us to a clear position that around a billion guidance gives us all the capacity we need.
What do customers expect when they come shopping with us or any of our competitors? Of course, they want great value but there are many other things that customers expect in terms of service and availability. Our commitment is to make sure we deliver against all of those.
Our guidance this year is making sure we have capacity to respond to the market where we need to but, above all else, deliver for our customers.
Do you expect inflation on general merchandise as a result of the global trade picture, including tariffs?
We have a lot of experience moving products across the world. Remember back to the pandemic, when freight costs of shipping were reaching unprecedented levels and the cost per container was something we’d never seen before.
As a result of the contracts and the relationships and the long-term thinking that we’ve done, we were able to navigate that and make sure that the impact wasn’t felt for customers.
We have a lot of work underway to make sure that we can manage the risk. Our priority is to make sure that customers get great value.
There are impacts more broadly on inflation in the UK. I talked after the Budget last year about the challenging cost environment we need to navigate. You’ve seen the actions that we’ve been taking to do that.
Some of those costs have now just begun. They bring pressure in the system, not just in retailers, but in suppliers in the UK as well, where their National Insurance costs have gone up.
There is clearly inflation pressure more broadly from all the things that are coming at the industry. Our job is to navigate that as best as we can and make sure that customers can be confident in getting the best value possible given all the events around us.
Do you think it is more urgent that the government look at the de minimis tax loophole?
I’m going to go back to the fundamental principle that we’ve talked about before, which is everyone should pay their tax. If there’s a loophole here that means that’s not happening, then it needs to be closed so it’s a level playing field for everybody.
As a retail industry, all my peers would be saying the same thing.
Do you think the government should rule out changing food standards, allowing chlorinated chicken, ahead of a potential US-UK trade deal?
We are 100% British-produced on our chicken and it’s one of the first examples of the long-term partnerships that we put in place.
Just over three years ago, we made a commitment to British sourcing and we did that because our customers want to buy British chicken. It’s the nation’s favourite protein.
We built a partnership in this supply chain, which means a chicken supply chain that is delivering improved animal welfare, improved sustainability standards, price-matched to Aldi on key products customers look for every week and available all the time, 100% British sourced.
Argos sales across the year were down 2.7% but improved in the fourth quarter. Can you talk about that?
We had a challenging start to the year. We saw slower online traffic holding back the volume of customers for a period. We had a tough summer last year, Argos is a business that’s very dependent on the seasons. Thirdly, the ongoing caution in customers on discretionary spend. Those were the factors that held us back last year.
We’ve been focused on making sure the transformation of Argos is making the progress that it needs to. You can see the improvement in our run rate performance for the rest of the year with sales back in positive territory in the fourth quarter.
When good weather comes early, customers buy things in businesses like Argos that they’re going to use throughout the summer, so hopefully the good start to the weather this year bodes well.
We’ve still got a big focus on all the things we need to do in Argos. It’s extending our ranges, adding thousands of new products to the assortment, making sure customers can always trust the value.
We should remember that Argos can deliver the fastest convenience of any online retailer out there. Order something today and pick it up early this afternoon in our stores.
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