By James Davey
LONDON (Reuters) -British supermarket group Sainsbury's has started its new financial year "with great momentum" despite a still uncertain outlook for consumer spending, forecasting a profit outcome ahead of market expectations.
Britons have been pressured for more than a year by soaring inflation, which has outstripped pay growth for almost all workers.
Official UK data showed food prices were 19.1% higher in March than a year earlier, the biggest rise since August 1977. In April, grocery inflation was 17.3%, according to industry data.
But Sainsbury's CEO Simon Roberts told reporters on Thursday it has consistently not raised prices as much as its key competitors, with its customers paying "less than half the headline rate of inflation".
Sainsbury's, which has a 15% share of Britain's grocery market, is having to balance the increased cost of products from suppliers with trying to prevent shoppers switching to discounters Aldi and Lidl. It also faces higher staff wage costs.
Underlying pretax profit was 690 million pounds ($861 million) in the year to March 4, at the top of guidance but down from 730 million pounds in 2021-22.
Revenue rose 5.3% to 31.5 billion pounds, with fourth quarter like-for-like sales up 7.8%.
For 2023-24 Sainsbury's forecast profit between 640 and 700 million pounds, ahead of analysts' average forecast of 631 million pounds.
"It's a really strong set of numbers," said one top 50 shareholder, particularly highlighting Sainsbury's free cash flow of 645 million pounds.
Sainsbury's shares were down 0.6% by 1133 GMT. They are up 30% so far this year. Costcutter owner Bestway has built a 4.47% stake but has said it is not planning a takeover offer.
Earlier this month, market leader Tesco (LON:TSCO) reported a 6.3% fall in annual profit and forecast a flat outcome for 2023-24. In March, No. 3 Asda reported a 24% slump.
Monthly industry data has shown Sainsbury's performing solidly versus its traditional rivals, but still losing market share to the discounters which continue to open lots of new stores.
Sainsbury's spent more than 560 million pounds over the two years to March 2023, funded by cost savings, to keep a lid on prices, taking a profit hit. It is price matching Aldi on hundreds of key items and leveraging its Nectar loyalty scheme.
Statutory pretax profit in 2022-23 fell 62% to 327 million pounds, impacted by asset impairments. A full-year dividend of 13.1 pence, in line with last year, is being paid.
($1 = 0.8012 pounds)