Breakfast briefing: Retail news on Sainsbury's, Primark and more

Sainsbury’s pension deficit exceeds £1bn

Sainsbury's pension deficit has increased from £389m in March to between £900m and £1.3bn, The Times reported.

The supermarket group would spend £125m to fill the deficit this year and a further £50m to fill the deficit of Argos that it acquired recently.

Owing to the lower returns of funds on their investments, there may have been an increase in deficit.

The BHS collapse has highlighted the problems faced by retailers in funding their pension scheme.  

On the other hand, City analysts believe Sainsbury’s statutory pre-tax profits may increase from £339m to £428m, with 0.3% higher revenue at £12.4bn.

Supermarkets halt plans to build new stores

The big four supermarkets have cancelled plans to build new stores amid change in shopping habits and uncertain Brexit climate, The Telegraph reported.

Over the past two years, major grocers have cancelled two-thirds of plans to build new stores.

This year, Sainsbury’s, Tesco and Morrisons have filed just one supermarket planning application compared with 20 two years ago, while Asda lodged plans for two new supermarkets this year.

According to Barbour ABI, Tesco and Sainsbury's plan to expand in convenience stores, with one in 20 new planning applications being for smaller stores.

Chief economist at Barbour ABI, Michael Dall, said: “These latest figures confirm that the large supermarkets are well and truly out of the 'space race’ and that the strategy for them is now to focus on price competition and customer offer rather than increasing footprint.”

Primark to increase profits despite struggling older stores

Primark owner Associated British Foods (ABF) is expected to deliver a 2% increase in annual pre-tax profits to £1.05bn despite slowed growth in older stores, The Telegraph reported.

According to City analyst ABF, it will increase revenues from £12.8bn to £13.1bn. However, the company will experience low profit next year owing to sterling's devaluation that makes importing clothing from overseas more expensive, it said.

Birds Eye and Walkers ask supermarkets to increase prices

Birds Eye and Walkers are trying to raise the prices of some items by up to 12% owing to fall in the value of the pound, The Guardian reported.

Birds Eye, owned by New-York-listed Nomad Foods, is seeking 12% price rises, while Walkers, owned by PepsiCo, is seeking price rises of between 5% and 10%.

Birds Eye’s UK and Ireland managing director, Wayne Hudson, said: “Increasing costs is not a decision we take lightly, and the last time it was necessary to raise costs was in 2012. As such, we have been in open and collaborative conversations with the retailers for some time now and are working closely with them to minimise any impact on our customers.”

A Walkers spokesperson said: “Fluctuating foreign exchange rates, supply pressure on key ingredients and the weakened value of the pound are impacting the import cost of some of our materials and affecting the price of material costs based on commodities that are traded in foreign currencies.”