Investors pile into Sainsbury’s, but will it last?
Sainsbury’s has proved a good bet for investors this year as the grocer goes from strength to strength, but will it last into 2026?
The UK’s second-largest supermarket has seen a 50 per cent uplift in share price since April, with another five per cent jump following better-than-expected results on Thursday.
It’s a marked departure from the atmosphere in the UK’s grocery market at the beginning of the year, when all the major players faced a share sell-off in the face of a possible ‘trolley war’ sparked by Asda’s price cuts
“The gain in [Sainsbury’s] shares in the last six months was based on more than just hope,” Chris Beauchamp, chief market Analyst UK at investment and trading platform IG, said, adding that its half-year results indicate long-term strength.
Nick Sherrard, managing director of Label Sessions, added that Sainsbury’s “is one of the UK’s best performing supermarket brands” at the moment.
“It has successfully carved out its proposition, staved off competition from cheaper alternatives, grown its market share, and strengthened its brand.”
“Only a couple of years ago, the supermarket was being written off as the cost-of-living crisis took its toll on consumer spending,” Sherrard said.
Sainsbury’s turnaround bears fruit
While Sainsbury’s might not have had as deep a restricting as other players in the space, the grocer has heavily leaned into simplification, price cuts and food innovation in the last few years.
It has targeted £1bn in cost saving by March 2027, with store format changes – like removing cafes – and business simplification core levers.
“Previously, the supermarket was squeezed in the middle between a flourishing Waitrose serving people who wanted posh food and the value end where the likes of Aldi, Lidl and Asda captured the bargain hunters,” Dan Coatsworth, head of markets at AJ Bell, said.
“Now, it has put up a good fight to boost its position at both ends of the spectrum… at the value end, it’s helped that Asda has lost its way in recent years and left Sainsbury’s able to score an open goal.”
Asda has struggled with high debt in the wake of a debt-fueled takeover, with market share still struggling despite a serious turnaround plan – it posted a pre-tax loss of £599m for its latest financial year.
“Sainsbury’s has also managed to stand its ground against the German discounters and resonate with shoppers where price is the most important factor.
“At the top end, it’s helped that Waitrose has come off the boil while Sainsbury’s has pushed hard on its premium range to win over shoppers looking for something special,” Coatsworth added.
Will it last?
Despite Sainsbury’s strong performance this year, analysts have been concerned that it has reached a peak.
Third Bridge analysts say Sainsbury’s market share is expected to stay steady over the next year.
“The supermarket has already captured meaningful gains over the past couple of years, but with Asda regaining ground and Aldi returning to form, further expansion looks limited in the short term,” they point out.
If Asda’s plan does end up fuelling market share growth, it poses a problem for Sainsbury’s, as does the strong performance of competitors Tesco and Lidl.
“It begs the question of how Sainsbury’s is going to meaningfully move its share of the grocery sector beyond the current level,” Coatsworth said.
“The lacklustre market reaction to its half-year results would suggest investors might be starting to wonder if the supermarket has reached its peak.”
Mark Crouch, market analyst for eToro, said that this festive season will be a “decisive” one.
“Tesco [is] still out of reach but the discounters [are] closing fast… Get it right, and 2025 could be the year Sainsbury’s finally steps out of Tesco’s shadow,” he said.