The pressure facing UK households will only intensify in the coming months as inflation hits incomes. That’s the warning from Sainsbury’s boss Simon Roberts this morning, as the supermarket chain reports a fall in underlying sales for the latest quarter. Roberts, chief executive of the supermarket group, says “We really understand how difficult it is for millions of households at the moment”, with inflation hitting a 40-year high of 9.1% in May. Customers are “watching every penny and every pound”, says Roberts, and he fears pressures on budgets will worsen as Sainsbury’s “invests £500m” to keep prices down. Roberts says: The pressure on household budgets will only intensify for the rest of the year and I am very clear that doing the right thing for our customers and colleagues will remain at the top of our agenda. Sainsbury’s underlying sales fell 4% in the 16 weeks to June 25 (excluding fuel sales) due to weakness in general merchandise as cash-strapped consumers cut discretionary spending. Grocery sales fell 2.4% compared to last year (when pandemic restrictions boosted spending at supermarkets), while sales at the Argos division fell 10.5% in the quarter. On Thursday, Sainsbury’s shareholders will vote on whether it should pay the independent living wage to all staff and contract workers. My colleague Sarah Butler explained last week: Sainsbury’s has increased wages for its 171,000 direct employees in more than 1,400 UK stores to the Living Wage, which is independently calculated for the Living Wage charity, at least £9.90 an hour outside London or £11.05 in the capital . However, it has not made the same commitment to contractors. Today, Roberts says: We’re proud to be the first major supermarket to pay the Living Wage to all colleagues, regardless of where they live – and to have increased the pay of Sainsbury’s colleagues by 25% and Argos by 39% in the last five years.
Also coming today
The latest UK car sales figures are expected to show registrations fell by almost a quarter year-on-year in June as the sector continues to struggle with supply disruptions (more on that shortly). The Bank of England is publishing its latest Financial Stability Report this morning, which will analyze the stability of the UK’s financial system and what it is doing to remove or reduce any risks to it. In parliament, MPs on the Business, Energy and Industrial Strategy Committee will examine the strengths and weaknesses of the UK semiconductor industry and its supply chain in a hearing. We also get the latest health check for UK and Eurozone service companies. In the City, the FTSE 100 is set to open slightly higher as European shares rally. However, copper is falling to a 17-month low on concerns of a possible recession.
THE AGENDA
9 a.m. BST: UK New Car Sales for June 9 a.m. BST: Eurozone Services PMI Survey for June 9.30 am BST: UK Services PMI Survey for June 10.15 am BST: BEIS panel holds hearing on UK semiconductor industry 10.30 am BST: Bank of England Financial Stability Report 11 a.m. BST: The Bank of England holds a press conference 3 p.m. BST: US Factory Orders for May
Updated at 08.23 BST
Sainsbury’s results: what the experts say
Richard Hunter, head of markets at interactive investor, says Sainsbury’s is struggling to maintain momentum as customers decline, based on today’s results. Faced with ever-tightening competitive screws, Sainsbury’s has its work cut out on any number of fronts listed in the statement. And the ferocity of competition in the sector is evident. Compared to strong comparisons from a partial lockdown last year, each of the main categories fell, with Grocery sales down 2.4%, Argos down 10.5%, General Merchandise down 14.6% and Apparel down 10.1%. The picture is marginally better than pre-pandemic sales, although still mixed, with Grocery up 8.7% and Clothing up 3.9%, but Argos down 4.5% and General Commodities down 13.8%. Here’s Grocery Insight’s Steve Dresser: I think the biggest reservation I have about Sainsbury’s is that they do a good job (much better now, with the lift) of Aldi Price Match. But it doesn’t say anywhere near enough about Sainsbury’s quality at the same time. — Steve Dresser (@dresserman) July 5, 2022 In JS – Big-ticket tech sales down, with economy (value) label sales up. Premium remains durable. — Steve Dresser (@dresserman) July 5, 2022 Matt Britzman, equity analyst at Hargreaves Lansdown, adds: “Jubilee celebrations may have been a temporary distraction for consumers indulging in Pimms, Prosecco and strawberries, but we’re way behind reality now. It’s not surprising that management is warning of a consumer watching every penny as the cost of living crisis takes its toll and the group expects that pain to come. So it’s positive to see the guidance remain intact, although it’s worth remembering that it has gone up and down already this year.
The cost of living reduces the demand for new cars
Rising energy costs are deterring drivers from buying new cars, with sales falling by around a quarter from last month. Lisa Watson, sales director at Close Brothers Motor Finance, explains: “The rising cost of living remains top of the agenda for consumers, with the price of electricity, petrol and diesel on the rise. This means that prospective car buyers must consider not only the initial cost, but also the ongoing costs of maintaining and running a vehicle. It is clear from June’s traffic figures that this is dampening demand for new cars. Alongside this shrinking demand, supply issues continue to cause massive delays, adds Watson: Stellantis is putting the brakes on production at several Citroen and Peugeot plants in France, and Ford recently closed its order book for the new Fiesta due to production difficulties. This follows recent difficulties for Toyota, Mini and the VW Group, exacerbated by the ongoing chip shortage. In fact, even customers looking to buy may be waiting until next summer for a car to land on their driveway.”
SAS files for bankruptcy protection in the United States as it fights for survival
The tail fin of a parked Scandinavian Airlines (SAS) plane is seen on the tarmac at Copenhagen Airport. Photo: Andrew Kelly/Reuters Scandinavian airline SAS has filed for bankruptcy protection in the United States as it tries to push through a financial restructuring as pilots go on strike. SAS AB said this morning that it had filed for Chapter 11 bankruptcy protection to speed up a restructuring plan announced in February. Pay talks between SAS and around 1,000 cabin crew, who are pushing for an improved pay deal, collapsed on Monday, sparking a strike that is adding to travel chaos across Europe this summer. The company said in a statement on Tuesday that it will continue to serve its customers throughout the bankruptcy process, although the pilots’ strike affects its flight schedule. Carsten Dilling, chairman of the board of SAS, explained: The Board concluded that legal tools are needed to make progress in our ongoing negotiations with key stakeholders and ultimately succeed in making SAS a competitive and financially strong business. The process we have started will allow SAS to continue our 75-year heritage as an integral part of the infrastructure and societies of Scandinavia. Sainsbury’s says it is “investing over £500m” in the two years to March 2023 to keep its prices low. This is funded by cost savings, the company tells shareholders, adding that it “continues to pull behind competitors”. [ie, raising prices less quickly]. A new term for the City term book…. Today’s Sainsbury’s @sainsburys results contain one of the funniest (and silliest) sentences in an RNS “we continue to bloat behind competitors”. I think I know what they mean… — Dominic O’Connell (@dominicoc) April 28, 2022 Updated at 08.15 BST On June’s fall in UK car sales, Bloomberg says: First-half sales fell 12 percent to about 800,000 vehicles — the second-weakest showing in 30 years. The SMMT has repeatedly called for government support to cushion the blow of rising energy costs as carmakers try to switch to producing zero-emission vehicles. The UK has seen car production steadily decline for decades, with uncertainty over the future of its trading relationship with the European Union adding to the industry’s woes.
‘It’s hard to find money to stretch’: single mothers say they need support
Jessica MurrayKelly Ross Photo: Graeme Robertson/The Guardian Lone parents face particular difficulties when it comes to the cost of living, as a special Guardian report this week shows. Kelly Ross, a single mum to her three-year-old son Charlie, has just found out her energy bills are tripling, from £94 a month to £292. With the summer holidays on the horizon, she doesn’t have much left in the pot for anything but the essentials, and she’s finding it hard to escape the constant weight of money worries. “I think I’m glad my son is so young right now because he doesn’t really know we’re missing things,” says the 39-year-old. “It’s hard to find the money to stretch and try to give your child a life to look back on with fond memories.” As she talks, her son Charlie zooms around Littlethorpe village hall on a trike while other parents and children play and chat. This is her one weekly respite, a free group for struggling parents in the area run by Leicestershire-based charity Home-Start Horizons. She says: “No one judges. If one day you want to…
