Food inflation is “starting to fall”, Sainsbury’s has said, as the retailer saw sales boosted by bank holidays and warmer weather.

The UK’s second largest supermarket said on Tuesday it expects pre-tax profits of between £640m and £700m for 2023 as grocery sales grew due to lower prices, but fuel sales sharply fell.

It said sales returned to growth last year despite cost of living pressures on households, in a trading update for the first quarter of its 2023-2024 financial year – the 16 weeks up to 24 June.

Grocery sales increased 11% in the period as the retailer said price reductions led customers to buy more.

As customers dealt with food and drink inflation, sales of lower cost ranges grew.

More than £60m was spent on price cuts across 120 essential items, Sainsbury’s chief executive Simon Roberts said.

Prices on the top 100 selling products are now lower than they were in March, he added.

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While Mr Roberts said food inflation was starting to fall, latest official figures showed the rate of food inflation remained at a stubbornly high 18.3%.

Overall shop prices rose 8.4% over the year to June, a slowdown from the 9% recorded in the year up to May, research from the British Retail Consortium and retail analysts NielsenIQ showed.

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Sainsbury’s strong sales were also attributed to warm weather and “particularly strong performance” over bank holidays. It also reported its best-ever Easter weekend.

Growth was also driven by spending in convenience stores and supermarkets, as the trading update said customers continued to return to stores.

Not all corners of the business grew.

Clothing sales were down 3.7% due to cooler weather, though sales strengthened when warmer weather arrived.

Fuel sales fell a steep 21.4% over the 16 weeks, far greater than the 2.8% drop in the final quarter of the last financial year. In the same 16 week period up to June last year sales grew nearly 50% (48.3%).

It follows an investigation from the Competition and Markets Authority (CMA) into the fuel market which found increased supermarket profit margins led to drivers paying an extra 6p per litre for fuel.

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Mr Roberts said: “We are putting all of our energy and focus into battling inflation so that customers get the very best prices when they shop with us, particularly now as household budgets are under more pressure than ever.

“Food inflation is starting to fall and we are fully committed to passing on savings to our customers.”

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