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Highlights
- UK's second-largest supermarket chain has said that it'll spend £500m to limit the price rises for its consumers.
- The announcement comes as household budgets in the UK are hit by the high cost of living.
The high cost of living in the UK is troubling millions of households. With the rising costs of essentials, including groceries, people are forced to make a choice about where to spend money. Almost everything on the shelf costs significantly more than last year as inflation has reached 40-year-high levels. To help people in the current situation, UK's second-largest supermarket chain Sainsbury's (LON: SBRY), has ramped up measures to offset the rising costs.
The company has announced that it will spend £500 million between March 2021 and March 2023 to keep the prices in check. Among the products that will be targeted are fruits, vegetables, milk, eggs, meat, fish, and 'key household essentials', the company said in a statement. It added that the amount includes the actions it took last year, and some steps will be taken this year and the next year.
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Sainsbury's strategy to keep a lid on the prices includes the Price Lock campaign, under which it has committed to keeping the prices of over 1,800 items unchanged for at least eight weeks. The company also said that it has had to pass on some of the price rises to the customers but emphasized that the rises were lower than its competitors.
Backlash over staff pay
Notably, the company is likely to face a backlash during its Annual General Meeting (AGM) 2022, scheduled in July, over the staff pay guarantees. This comes as negotiations have failed between Sainsbury's and ShareAction, a coalition of its ten institutional investors, for the company to become a permanent Living Wage employer by July 2023.
Last month, Sainsbury's chairman Martin Scicluna asked shareholders to reject ShareAction's resolution regarding the benchmark, saying that the company doesn't want a third party to decide what its employees will be paid.
The retailer has so far this year completed two pay reviews amid rising inflation. The most recent one was done in April, which put all of its staff outside London above the real Living Wage, which is £9.90 an hour. From May, all the staff working in London Borough are earning £11.05 per hour.
Sainsbury's FY2021 results
For the 52 weeks to 5 March 2022, Sainsbury’s revenue, including fuel, reached £29,895 million, with a profit after tax of £677 million. The company has said that the performance for the current year will be marked by significant external pressures and uncertainties. Therefore, it expects its underlying profit before tax for FY2022 to be between £630 million and £690 million.
Share price performance of Sainsbury’s
Over the past one year, Sainsbury’s share value has depreciated by around 13%. The year-to-date return hasn't been particularly good either and currently stands at -16%.
The market cap of the supermarket chain is £5,404.90 million. Its share price closed at GBX 231.10 on 30 May.
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