Brexit: Sainsbury’s boss Mike Coupe warns EU departure may push costs up

Supermarket's profits were boosted by addition of Argos stores to its sites

Sainsbury’s has reported a 20 per cent lift in profits in the first half of the year, which it said was due to its tie-up with Argos, which delivered a strong performance sooner than expected.

The supermarket posted underlying pretax profit of £302m, up from £251m in the same period of last year, as group sales rose 3.5 per cent to £16.9bn. Like-for-like sales, excluding fuel, rose 0.6 per cent.

Mike Coupe, Sainsbury’s group chief executive, said the market was still “very competitive”, which was forcing the group to transform to meet “rapidly changing customer needs”.

“We have fundamentally changed how our 135,000 Sainsbury’s store managers and colleagues work, and I would like to thank them for their ongoing hard work through this period,” he said.

One of those changes includes adding Argos stores to Sainsbury’s supermarkets.

Mr Coupe added: “We have delivered a solid first half performance and profit has increased because we have delivered significant Argos synergies ahead of schedule. Sales of food and general merchandise were boosted by the hot summer, but general merchandise margins remain under pressure.

“Our strategy of offering customers a distinctive range of high quality and great value food has driven like-for-like sales growth at Sainsbury’s. Where we have invested to [reduce] prices, volumes and transactions have increased.”

However, Mr Coupe also warned Brexit was likely to push up costs.

“The reality is that it is a challenge, in the sense that we currently bring things in from the European Union – about 30 per cent – unencumbered, and anything that gets in the way of that will either add cost or reduce freshness,” he told the BBC.

“And of course it is impossible to stockpile fresh food products ... we have 20 very large distribution centres around the country and they carry roughly a week’s stock, so you can do your own arithmetic, but we would urge the government to get to a settlement.”

Sainsbury’s is in the process of merging with Walmart-owned Asda in a £12bn deal that is the subject of an investigation by the competition watchdog.

Mr Coupe said: “Our proposed combination with Asda will create a dynamic new player in UK retail, with the ability to further lower prices and to reduce the cost of living for millions of UK households.”