LONDON (Reuters) - Britain’s major supermarket chains could benefit from a small decline in overall spending by Britons because people will eat at home more rather than dining out, the boss of Sainsbury’s said on Wednesday.
British shoppers are starting to feel the strain of rising prices caused by last year’s Brexit vote, suggesting the economy is heading for a slowdown just as London gears up for divorce talks with the European Union, recent surveys and data have indicated.
“If there’s a small squeeze it’s not necessarily a bad thing for a large grocery chain,” Sainsbury’s Chief Executive Mike Coupe said at the RetailWeek Live conference.
Sainsbury’s is Britain’s second largest supermarket group, trailing market leader Tesco in annual sales.
“I suspect if we see customers’ incomes being squeezed - and we’re beginning to see a slowdown in that disposable income growth - actually supermarket chains tend to do better because people stop eating out and start eating in,” he said.
“I‘m not saying I would ask for it because I think broadly speaking it’s not good for the economy more widely.”
Coupe noted that when consumers do opt to eat at home they tend to “trade-up” to premium brands, seeing them as the closest substitute to dining out.
Industry data published on Tuesday showed British food inflation has doubled in a month, with the price of staples including butter, tea, lamb and fish all rising, reflecting the weaker pound since June’s Brexit vote as well as commodity price rises.
“If you think about the effect of exchange rates it’s little short of remarkable that the industry has managed to hold down prices for as long as it has,” said Coupe.
“Inevitably there are price pressures in the market place but this is against a backdrop where food prices have dropped by 4 percent over the last couple of years.”
Last year Sainsbury’s bought Argos-owner Home Retail for 1.1 billion pounds, enhancing its online logistics and general merchandise range.
The group wants to have 250 Argos digital stores in Sainsbury’s shops over three years. Coupe said it would have 41 as of the end of the week.
It is also targeting synergies of 160 million pounds in three years. Coupe told the conference that figure was conservative as it did not take account of growth in the Habitat brand that was also part of the Home Retail deal or of anticipated growth in financial services.
Sainsbury’s will update investors on fourth quarter sales on March 16.
($1 = 0.8223 pounds)
Reporting by James Davey; Editing by Keith Weir