- Tesco’s profits fell due to property values, rising interest
rates and admin expenses. Not because of “absorbing” increased
food costs.
- Sainsbury’s gross profit “before non-underlying items”
actually increased last year. It was £2.42 billion in 2022/3, 3%
higher than £2.36 billion in 2021/2.
A deep dive into supermarkets’ accounts by Unite’s team of
forensic accountants rips apart claims that food prices have
squeezed Tesco’s and Sainsbury’s latest profits https://www.unitetheunion.org/foodprofiteeringreport/ (also
see notes).
Commentators defending corporate interests have used Tesco’s fall
in profit in 2022 as proof that the Supermarkets are not engaged
in “rampant profiteering” in the midst of the cost of living
crisis. Sainsbury’s boss has even claimed “We are not profiting
from high prices.”
But Unite can reveal that Tesco’s profits fell mainly due to a
revaluation of its property portfolio after interest rates shot
up last year, as well as rising “administration expenses”. Not
because of “absorbing” increased food costs from its suppliers.
Sainsbury’s gross profit “before non-underlying items” actually
increased last year. It was £2.42 billion in 2022/3, 3% higher
than £2.36 billion in 2021/2.
Even as their customers struggle with high food prices, the two
biggest supermarkets, Tesco and J Sainsbury, are paying out a
massive £1.2 billion to their shareholders this year. Tesco plans
to pay £859 million in dividends in 2023; Sainsbury £319 million.
These are their highest “common” dividends since 2015.
Unite general secretary Sharon Graham said: “The
scandal of Greedflation continues. Ordinary people are paying the
price at the tills and no PR offensive by the supermarket giants
can cover that up.
“Our team of forensic accountants has examined their
claims that mega profits have dipped as they “absorb” increased
food prices. But a deep dive into Tesco’s and Sainsbury’s
accounts finds no sign that this is the case.
“Instead, Tesco’s continue to pay out big dividends
and any fall in its still high profits occurred mainly due to a
revaluation of its property portfolio. Whilst Sainsbury’s gross
profit actually increased last year.
“Reckless profiteering is one of the scandals of our
age and it’s time our politicians took action to protect the
public.”
ENDS
Notes to editors
Tesco
Tesco announced a net profit after tax of £747 million: some way
down on £1.48 billion last year, and marginally lower than £971
million in 2019. Its “adjusted operating profit” fell 7%.
But the numbers tell a very different story of a Supermarket
continuing to make big profits at customers’ expense. In fact
they show no major impact on its profits from “absorbing”
increased food costs from its suppliers.
Tesco’s Income Statement in its results announcement shows that
its “gross profit before adjusting items” was £4.69 billion in
2022/3, just 2% lower than the £4.81 billion in 2021/2. And if we
factor out a financial loss from Tesco Bank, gross profit was
only down 0.3%. This figure represents the money it made on sales
– including food, petrol, and Tesco Bank – minus its sales costs.
Thus it suggests that there was no major impact on its profits by
“absorbing” increased food costs from its suppliers.
Its operating profit fell due to increased “administrative
expenses”; while its final net profit fell mainly because of a
£982 million “non-cash asset impairment charge”. This was a
decrease in the assessed value of its assets, “mainly property”.
This was “mainly due to an increase in discount rates” because of
rising interest rates. It was not because of food costs.
Sainsbury’s
Sainsbury’s gross profit “before non-underlying items” actually
increased last year. It was £2.42 billion in 2022/3, 3% higher
than £2.36 billion in 2021/2.
The drop in its final net profit was because of factors including
“non-cash asset impairments”, “one-off income from legal
settlements in the prior year”, and “restructuring costs”.
In fact, a note in Sainsbury’s accounts reveals that part of the
“non-underlying” cost in 2022/3 was a £106 million spent on its
“restructuring programme”. And £54 million of that came from
redundancy payments – “redundancies announced as part of Argos
store closures, depot closures, and the exit of operations in
Ireland.” Sainsbury is carrying out a job cuts programme at
Argos, including an announcement in February that threatened 750
jobs at two Argos depots.
