The watchdog’s review found that profits have in fact fallen across the sector as retailers held back from passing the full impact of rising prices onto consumers.
Margins have dropped from an average of 3.2pc to 1.8pc, while operating profits across the sector declined by 41.5pc.
Of course the CMA are still ignorant tossers:
The CMA ruled earlier this month that Asda, Morrisons, Tesco and Sainsbury’s had overcharged drivers by £900m in 2022 alone for fuel as it concluded a year-long, separate investigation into fuel prices at the pumps.
Nonsense, the supermarkets simply rebalanced where they tried to make margin. Less on food, more on fuel.
What a miserable name the CMA has. It was far better as The Monopolies Commission.
Which led to the marvellous joke “Why is there just one Monopolies Commission?”
Yet no one criticises the government for the huge increase in VAT receipts to the treasury from the rise in the price of everything.
Let’s give Scotland independence on condition they must take everybody who thinks business and markets are evil. It would be an interesting (and amusing) experiment.
Nonsense, the supermarkets simply rebalanced where they tried to make margin.
Still greed, though. Not saying it’s a bad thing, but the supermarkets will have been using every opportunity to grab every penny, including hiding profiteering price rises amongst the general inflation. You could tell they were individually doing this by comparing prices. If their profit margins went down it probably means more people compared prices (and cut back generally).
Of course, if they colluded in “rebalancing where they made margins” that’s where the CMA should properly sanction. If they didn’t collude, what’s basis does the CMA have for saying they “overcharged”?
No thanks Arthur (unless they are Olympic quality athletes or top level footballers).
@PJF
You have a very peculiar definition of greed and profiteering if they result in lower profits.
A simple thank you for helping people balance their budgets would have sufficed.
The supermarkets have been very clever, they’ve made sure that they haven’t used their monopoly power to obviously increase profits. But they’ve made damn sure they aren’t losing out too much either. With the price of fuel doubling, wages hiking, and all the other cost rises you’d have expected their profits to be decimated, but they haven’t been, because they’ve raised prices by enough to cover all the higher costs, and still make a hefty profit (more profit than pre covid, when profits were on a downward trend). They aren’t stupid enough to go the whole hog and make mega profits (which they could, because people have to eat) but just maintaining their profit margin in a time of rampant cost inflation says to me they have considerable pricing power, and have been using it. They just have the political nous to not make it obvious.
Err, yes:
https://www.retailgazette.co.uk/blog/2023/04/sainsburys-profits-fall-2/
Who’d be a supermarket boss eh? You keep everything going pretty much as usual through covid supply chain chaos and governmental derangement, then sacrifice half your margin and the bulk of your profits to help your customers deal with inflation and you still get slated.
The UK supermarket business is a great example of competition delivering for consumers. In Hong Kong, where almost every supermarket brand is owned by 2 groups, prices are high and quality generally poor (unless you shop where prices are astronomical).
Thats Sainsburys, they are shit. I arrange my mothers weekly shopping at Sainsburys online and their website is awful, their stock availability terrible. Occasionally I go to one of their stores, there’s always staff standing around doing nothing. I’m surprised they make any profit at all, they certainly don’t deserve any.
Tesco on the other hand made £2.6bn last year, same as 2019. Funny that…….
You have a very peculiar definition of greed and profiteering if they result in lower profits.
No, I just understand there’s a gap between the greed / profit motive and success in the endeavours.
(see also gambling)
The UK supermarket business is a great example of competition delivering for consumers.
Yes – the competition. But that doesn’t mean the supermarkets aren’t a cynical shower of bastards.
Adam Smith said something related to this.
From the article:
” supermarkets taking a “rocket and feather” approach to prices: boosting them when costs surge, but bringing them down much more slowly as costs fall. Much of this is to do with how the market is structured. Some ingredients and commodities are bought on fixed term contracts, meaning prices are fixed ahead of time. If a contract was agreed when prices were high, food suppliers may not see the effect of falling prices until they are able to renegotiate.”
What a load of bullshit. A company is not able to fix its output prices in respect of its input prices, unless it has some sort of monopolistic control over pricing. If I buy fertiliser forward at a high price, and the market price for wheat drops by the time I get to harvest it I don’t get to tell the grain buyer ‘Sorry, my costs are fixed at a high level, I’ve got to sell all this wheat at £30/tonne over the market price’. No, I have to sell at the market price and take the hit to my bottom line. If supermarkets, and/or their suppliers are able to control their output prices based on forward input pricing, then they are by definition fixing the market.
“Tesco on the other hand made £2.6bn last year, same as 2019. Funny that…….”
Except that that is not true. From the report and accounts (the year end is February)
Operating profit
2019:2639
2020:2283
2021:1933
2022:2575
2023:1525
If you round to one decimal point then accounting years 2019 and 2022 were both £2.6bn.
I would, of course, be quite content to receive 1% of the difference between the other decimals . . .
Then when one of them goes bust or gets bought out by another, it’ll be “market failure”.
“If you round to one decimal point then accounting years 2019 and 2022 were both £2.6bn”
How is that relevant. In the year ended February 2023, the period of highest inflation, the profit fell by 41%, which directly contradicts what Jim stated.
Tesco’s gross margin dropped from 7.6% to 5.6%,their lowest gross margin since 2018. Some profiteering!
@PJF – “No, I just understand there’s a gap between the greed / profit motive and success in the endeavours.”
If someone intends to be greedy, but fails to achieve this to the extent that they are actually accepting lower profits, why are you be complaining about them? Surely, it’s the results that matter.
Don’t ask PJF to be rational. He is just a contrarian