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Supermarkets denied profiteering during the cost of living crisis despite eye-watering levels of food inflation. Tesco chief Gordon Gafa said even though it is selling more, it is making less, with profits dropping by seven percent.<\/p>\n
He told MPs the chain is now the \u201cmost competitive we have ever been\u201d as it vies for customers looking for the cheapest prices.<\/p>\n
Mr Gafa said: \u201cWe have not made more profit year-on-year. We have actually made seven per cent less profit versus our last financial year. It\u2019s important to be clear on that from the outset.\u201d<\/p>\n
Quizzed by the Business and Trade Committee about why profits were \u00a3400 million in 2021 compared to 2018, he replied: \u201cProfits year-on-year for the group are down, we have sold more year on year and we have made less.\u201d<\/p>\n
Tesco, which is the UK\u2019s biggest supermarket chain, saw its profits cut from \u00a32.03 billion by more than half to \u00a31 billion in the year to February 2023. The drop came despite a 5.3 percent increase in its sales, excluding VAT and fuel, over the year.<\/p>\n
READ MORE <\/strong> Boots to close hundreds of stores across the UK in the next 12 months[LATEST] <\/strong><\/p>\n Sainsbury\u2019s also reported a drop in profits last year, tumbling by more than half to \u00a3327 million. Morrisons recorded a decline in earnings of 15 percent to \u00a3828 million over the year to October 30, from \u00a3975 million in the previous year.<\/p>\n Asda said its profitability fell by almost a quarter to \u00a3886 million in 2022. Office for National Statistics figures last week showed food price rises have eased slightly but remain at a stubbornly high 18.4 percent.<\/p>\n Supermarkets are under pressure to hand down savings they are seeing on wholesale items to consumers. Sainsbury\u2019s insisted it was not passing all the costs of inflation in its supply chain to customers.<\/p>\n Rhian Bartlett, food commercial director, told the committee the chain has made lower profits and is putting more money into keeping bills down.<\/p>\n She said: \u201cWe are acutely aware about the cost-of-living impact on our colleagues and how difficult they are all finding it right now.<\/p>\n \u201cWe\u2019ve spent \u00a3560 million on keeping prices low, battling inflation and are doing absolutely everything we can to keep prices as low as possible for customers.<\/p>\n Don’t miss… <\/strong> We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info<\/p>\n \u201cIn the most recent year we made lower profits, at \u00a3690 million \u2013 input costs are not being fully passed through to our shelf prices.<\/p>\n “We\u2019ve submitted lots of detail on that to the CMA (Competition and Markets Authority) and have had good discussions with the CMA. We are inflating behind our input costs and inflating wherever possible behind the market.\u201d<\/p>\n The committee was told any attempt to impose price caps would backfire. Ms Bartlett said: \u201cThis is fiercely competitive as a market.<\/p>\n \u201cWe\u2019re generally considered one of the most competitive food markets in the world. I\u2019m not sure what price caps would add to that process, other than bureaucracy.<\/p>\n \u201cWhere we\u2019ve seen them applied in France and so on it can have unintended consequences \u2013 of selling out and other prices moving up and down. So I think this market self-regulates to a positive extent, so we wouldn\u2019t be in support of price caps.\u201d<\/p>\n Analysis by the BRC-NielsenIQ Shop Price Index showed retailers are beginning to pass on lower wholesale costs, with food inflation easing for a second month running as supermarkets cut the price of household staples.<\/p>\n Food inflation decelerated to 14.6 percent in June, a relatively significant drop from May\u2019s 15.4 percent and below the three-month average of 15.2 percent.<\/p>\n Fresh food inflation saw a significant slowing from May\u2019s 17.2 percent to 15.7 percent as retailers dropped the prices of staples including milk, cheese and eggs.<\/p>\n Morrisons chief executive David Potts told the committee that eggs and pork had been high because of specific issues in the industry.<\/p>\n He said: \u201cEggs are a specific example and the reason is that with avian flu, we lost 420 million birds around the world so the meat itself and particularly the eggs were in short supply.<\/p>\n \u201cProducers are starting to rebuild the flocks and are coming back across all the UK. I am hopeful that we will see a gradual normalising of the egg price.<\/p>\n \u201cI will also mention pork, where an almost over-supply of pigs led to a reduction in the rearing of pigs just at a time when demand was going up.<\/p>\n \u201cThat has put a relatively cheap meat under pricing pressure.\u201d<\/p>\n Mr Potts also defended the supermarket\u2019s fuel pricing policy following criticism of chains for failing to pass on a 5p cut in duty last year.<\/p>\n He said: \u201cWe did pass that on, on the same day. Clearly the volatility within the market has to be tracked over time. We have passed on everything the CMA has asked for and will continue to do so.\u201d<\/p>\n He added: \u201cI think we can always do more. The energy costs that exist, the transport costs, the labour costs within our sites, they all have added to the oil barrel post-Russia.<\/p>\n \u201cI do think over four decades the British supermarkets have brought lower prices to consumers in Britain for fuel. These are facts, and right now the prices on our supermarket forecourts are lower than the independents and continue to be so.\u201d<\/p>\n![](\"https:\/\/cdn.images.express.co.uk\/img\/dynamic\/22\/590x\/secondary\/4827213.jpg?r=1687902843167\")
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