Jan 12, 2022
UK grocers/inflation: higher prices should mean better earnings
The two largest supermarkets, Tesco and Sainsbury's, have generally benefited during periods of price inflation. Food price inflation most recently measured 3 per cent annually, but well below the high levels after the 2008 financial crisis. Reports of rising prices provide an opportunity to pass on costs to customers, and more. Leader Tesco's gross margins over the past 25 years correlate strongly with higher food prices. More broadly, earnings momentum for Tesco and Sainsbury's has improved during periods of both UK consumer and wholesale price inflation since 2002.
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