Rising prices and fears of a consumer spending downturn are set to be key themes when supermarkets Sainsbury’s and Morrisons report figures this week.
Under-pressure food sales will be in sharp focus when Sainsbury’s kicks off with its full-year figures on Wednesday.
The Big Four chain revealed a 0.5% fall in like-for-like supermarket sales, excluding fuel, in its fourth quarter to March 11, down from a rise of 0.1% in the previous three months.
While it said sales would have risen by 0.1% had it not been for the later Mother’s Day and Easter this year, the group warned over “very competitive” trading and price pressures from the weak pound.
Overall sales were boosted by a robust performance from its recently acquired Argos chain, which notched up a 4.3% rise in like-for-like sales over the nine weeks.
The Argos sales hike helped lift group-wide comparable sales into positive territory, up 0.3% in the fourth quarter.
Annual profits will include six months of trading from the Argos business, taken over alongside Habitat when it acquired Home Retail for £1.4 billion last year.
Analysts are pencilling in underlying annual pre-tax profits of £578 million, including Argos, but experts at Jefferies said their forecasts point to a 15% decline in earnings over the second half with Argos stripped out.
Meanwhile, Morrisons is expected to report steady sales growth when it releases first quarter results on Thursday, despite facing industry pressures including rising food prices linked to the post-Brexit vote collapse of the pound.
Like-for-like sales growth is expected to reach 1.7% in the first quarter, according to Jefferies, while Shore Capital is forecasting an increase of between 1.75% to 2% over the period.
Analysts say Morrisons is in a better position to handle a tougher trading environment than its peers, with retailers widely expected to suffer as shoppers reign in spending amid rising inflation.
Food prices have already started to rise on supermarket shelves as producers pass on the soaring import costs triggered by the Brexit-hit pound.
“A number of industry sources have confirmed a step up in food prices in recent weeks,” Jefferies said in a research note.
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