Highlights

• Tesco chief John Allan has warned that by spring the food price inflation may hit 5%, squeezing the budget of low-income households.
• The food prices at the supermarket chain grew by 1% in the last quarter due to rising energy prices and which could further rise by 5%, Allan added. 

UK’s growing cost-of-living crisis is worsening by the day with soaring inflation and rising fuel prices. The inflation level touched 5.4% in December 2021, up from 5.1% in November. Data shows that the prices have risen at the fastest pace in the last 30 years.  

Recently, UK’s largest supermarket chain Tesco chairman John Allan warned that by spring, the food price inflation may hit 5%, as energy, grocery, national insurance contribution, and other costs are set to increase, which will squeeze the budget of low-income households.

Allan added that the food prices at the supermarket chain increased by 1% in the last quarter due to rising energy prices and this could further rise by 5% in the coming months. Although food contributes only 9% of the household spending, it is a bigger proportion for lower-income households.

According to report by the British Retail Consortium, the food inflation in January rose to 2.7%, up from 2.4% in December 2021. The Tesco chief added that grocers and suppliers are not yet immune to rising energy costs.

Currently, the UK’s inflation stands at 5.4%, the highest in the last 30 years, and is forecasted to hit 6% by the spring. Households need to tighten their spending on luxuries and unnecessary spending. The price rise coincides with the increase in the energy price cap, which has increased by £693 to £1,971, and rise in national insurance contribution, both of which come into effect in April 2022.

Further, the Bank of England has recently announced a rise in interest rates to 0.5% from 0.25%, which will push the borrowing costs.

Also Read: Rising energy bills: 5 stocks you want to put on your watchlist

Let us now look at five supermarket stocks that may be affected by the rise in food inflation. 

Tesco Plc (LON: TSCO)

FTSE 100 constituent Tesco Plc is the UK’s largest supermarket chain that deliver its offering through its stores and online channels. The company is engaged in the retailing and associated activities and retail banking and insurance services.

Tesco Plc has given a return of 20.23% to its shareholders in the last one year and its year-to-date return stands at 2.17% as of 7 February 2022. Its shares were trading at GBX 295.75, up by 0.07%, at 8:00 AM BST, with a market capitalization of £22,607.21 million on 7 February 2022.

Marks and Spencer Group Plc (LON: MKS)

Marks and Spencer Group Plc is a multinational retail company that offers food, clothing, and home products through over 1,509 stores and more than 100 websites globally. It is a constituent of the FTSE 250 Index.

Marks and Spencer Group Plc has given a return of 48.46% to its shareholders in the last one year and its year-to-date return stands at -11.24% as of 7 February 2022. Its shares were trading at GBX 204, up by 0.34%, at 8:00 AM BST, with a market capitalization of £3,991.93 million on 7 February 2022.

Also Read: Cost of living crisis: Bank of England expected to hike interest rates

Associated British Foods Plc (LON: ABF)

Associated British Foods Plc is a multinational diversified food, ingredients, and retail company with operations in over 53 countries across Europe, Africa, Asia, Americas, and Australia. It is also a constituent of FTSE 100 Index.

Associated British Foods Plc has given a return of -17.14% to its shareholders in the last one year and its year-to-date return stands at -5.50% as of 7 February 2022. Its shares were trading at GBX 1,898, up by 0.72%, at 8:00 AM BST, with a market capitalization of £14,919.10 million on 7 February 2022.

J Sainsbury Plc (LON: SBRY)

J Sainsbury Plc is one of the largest merchandise retailer companies in UK that offers food, general merchandise and clothing and financial services products through over 800 convenience stores, 600 supermarkets and online.

J Sainsbury Plc is a FTSE 100 constituent and has given a return of 22.68% to its shareholders in the last one year and its year-to-date return stands at 4.93% as of 7 February 2022. Its shares were trading at GBX 289, up by 0.38%, at 8:00 AM BST, with a market capitalization of £6,716.45 million on 7 February 2022.

Also Read: How hike in interest rates will hit Britons

Ocado Group Plc (LON:OCDO)

Ocado Group Plc is an online grocery retailer that is engaged in grocery retailing and the development and monetization of Intellectual Property (IP) and technology used for online grocery retailing, fulfilment, logistics and services in the UK, Australia, Europe, Japan and North America.

Ocado Group Plc has given a return of -49.32% to its shareholders in the last one year and its year-to-date return stands at -15.26% as of 7 February 2022. Its shares were trading at GBX 1,418.50, up by 0.60%, at 8:00 AM BST, with a market capitalization of £10,597.55 million on 7 February 2022.