Sainsbury's joins price war - but could be outgunned

Britain’s second-biggest grocer has a tough road ahead if it is to keep the promises its CEO has made

- James Moore

Welcome to the £1bn club, Sainsbury’s. Fresh from revealing such estimable profits, the grocer reckons it can see off its rivals in the supermarket price war – also known as the best news for the UK consumer in years – and retain its membership. Has CEO Simon Roberts found some magic beans?

Before we discuss whether his beanstalk will grow as he is promising, a word about that £1bn, a 7 per cent increase on last year’s effort. This has been achieved via something called “retail underlying operating profit”, which some might consider to be a made-up number.

Why? Well, it strips out £305m of financing costs, which are really rather relevant, and excludes a further £377m of one-off charges. The actual pre-tax profits – you know, the figure that we all used to look at when I got into this game, because it’s real, and because it includes all that stuff – came to, ahem, £384m.

Nevertheless, Sainsbury’s says retail operating thingy profits should roll in at about £1bn in the current year, despite Asda parking its tanks on all of its rivals’ lawns, and Tesco responding by saying, “Come and have a go if you think you’re tough enough.”