Asda has become the latest supermarket to warn of rising prices due to tax changes in last week’s Budget which will hit the retailer with £100 million in extra costs.
Chairman Lord Stuart Rose said the increase in employer taxes is “a big burden for business to carry”.
He said the firm will do all it can not to pass extra costs on to consumers, but it is likely to result in rising costs at the supermarket in some form.
“We are a very efficient industry, as retailers. We will do everything we can to mitigate this cost.
“But of course, you can’t deny it will probably be inflationary to some degree. We’re just working through the details of that now… We’re looking at the impact.”
The main tax rise in Labour’s Budget was the £25.7 billion change to employers’ national insurance contributions.
The amount of money raised for the Exchequer will is expected to be around £16.1 billion by 2029/30 as firms curb wage rises, cut hours and reduce profits while public sector employers get compensation in their budgets for the change.
Asda became the latest business to warn that the changes would hit its bottom line and, in turn, potentially its customers, after Sainsbury’s boss Simon Roberts said there was “already too much pressure” on firms.
Sainsbury’s warned of a £140 million hit, while Marks & Spencer said earlier in the week that it would mean £60 million in extra costs, which will be pushed higher by an increase in the national living wage.
Separately, Asda reported a 2.5% decline in third quarter revenues, excluding fuel, to £5.3 billion, as sales fell 4.8% versus the same period last year.
The supermarket recently cut 475 head office jobs as part of a major shake-up after the latest change in leadership at the private equity-owned retailer.
We’ve slightly lost the plot in terms of giving (customers) what they want on a daily basis
Lord Stuart Rose
Former M&S boss Lord Rose is leading the business alongside ex-eBay senior vice president Rob Hattrell after co-owner Mohsin Issa stepped back from running Asda in September.
He said Asda will spend £30 million on getting more staff on the shop floor at its more than 1,200 UK outlets.
Lord Rose said: “We’ve slightly lost the plot in terms of giving (customers) what they want on a daily basis.
“If you go and look at our stores, they’re not as nice as I’d like them to be in terms of the experience and the visuals.
“They’re not as good as they should be in terms of the service we give our customers on availability, and we’ve probably lost a bit of sharpness on price.”
He added those are “operational things” which the chain can fix. “It won’t be fixed in short order. But we’re on to it.”
Lord Rose did not give an update on appointing a permanent chief executive, saying “the fit has got to be right”.
Asked if a new CEO would be appointed within the next six months, he said: “I hope so.
“I recognise that people may be thinking to themselves, is this ever going to happen? But the answer is yes.”