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.

Sainsburys

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.

Contact: Ciaran Naidoo 07768 931 315 

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Web: unitetheunion.org

Unite is the UK and Ireland’s leading union fighting to protect and advance jobs, pay and conditions for members working across all sectors of the economy. The general secretary is Sharon Graham.