In defence of UK supermarkets: they probably aren’t profiteering

theguardian.com:

B ashing supermarkets is popular – and often the chains deserve a whack. Memories are fresh of how big food retailers had to be shamed during the pandemic into returning the business rates relief that was intended for shopkeepers whose doors, unlike theirs, were shut on government orders. But here comes an accusation of greed that looks wide of the mark: grubby profiteering during the food inflation shock.

Ed Davey, the Liberal Democrat leader, gave the profiteering thesis a whirl last week when he claimed wicked supermarkets are “raking in eye-watering profits” and called for the Competition and Markets Authority to investigate. Which accounts is Davey reading? Evidence of super-normal profits – which is what one assumes he means – is hard to spot in the audited numbers of Sainsbury’s and Tesco, the two biggest operators.

Rather than being eye-watering, profit levels are historically normal if one looks over several years. Ignoring distortions from property transactions, store writedowns, write-backs and suchlike, the tale is one of returns going roughly sideways.

Here’s the read-out of Sainsbury’s pre-interest underlying operating profits from retail, probably the most useful measure in this context, starting with the latest 2022/23 financial year and going backwards: £926m, £1bn, £713m, £938m and £981m. The dip in the middle was the pandemic-afflicted year of extra costs (just not enough extra to deserve relief from business rates), but otherwise the notable feature is the tightness of the range. In fact, Sainsbury’s was making more annual profit from groceries a decade ago.

At Tesco, the recent picture is similar. The market leader also reported a 7% fall in adjusted retail operating profits for the latest financial