Sainsbury’s warns on growth as trolley wars heat up
Sainsbury’s has said it expects no profit growth in the next year as competition in the grocery market intensifies.
The supermarket giant reported retail underlying operating profit of £1.036bn in the 52 weeks ended March 1, up 7.2 per cent from £966m last year.
It said double-digit growth at its Sainsbury’s retail arm was partially offset by lower profits at Argos, which the company acquired in 2016.
The result was well within the company’s guidance of between £1.01bn and £1.06bn.
However, the supermarket warned that it expects growth to vanish over the next year as costs eat into its bottom line.
Sainsbury’s said its retail underlying operating profit for the 2025/2026 financial year would come in at £1bn – below last year’s figure.
This follows listed peer Tesco, which last week warned that group adjusted operating profit would fall next year due to a “further increase in the competitive intensity of the UK market”.
Asda, which has seen a declining market share over the past year, recently made waves by talking of the ‘war chest’ he had to spend on turning around the grocer.
It sparked a sell off in listed grocers Tesco and Sainsbury’s, with billions of pounds wiped off their stock market value.
“A 7.2 per cent rise in retail underlying operating profit is bang in line with expectations but a flat outlook might be a sign the looming fight with Asda, and contending with NI increases, could be punishing for Sainsbury’s,” Robinhood lead analyst Dan Lane said.
“The worry for Sainsbury’s should be that a battle between a hungry Aldi and a brakes-off Asda chops down its market share at a time when it has already dropped prices to compete with the German discounter. A price war makes passing recent extra costs, like those NI increases, onto consumers even harder so it looks like Nectar and cost efficiencies are really going to have to pick up the slack.
“This time five years ago, Sainsbury’s and Asda were neck and neck in the market shares stakes with just over 15 per cent each. It’s a different scene now and Sainsbury’s 0.7 per cent lead is now 2.7 per cent. In reality, Asda had few other levers to pull to make up for lost time so it’s no surprise to see the price war heating up again,” Lane added.
Sainsbury’s announces share buyback and special dividend
The grocer also announced a £200m share buyback programme, and said it expected to return £250m to shareholders via a special dividend in the second half of the year.
It follows a £200m share buyback programme in the 2024/25 financial year.
Sainsbury’s said that the share buyback was a result of its strong balance sheet and cash generation.
Overall during the year, retail sales rose 3.1 per cent to £31.55bn, while underlying profit before tax rose 8.6 per cent to £761m.
Group revenue was up 1.8 per cent to £32.8bn, and profit after tax increased by 76.6 per cent to £242m.
The company will open 15 new supermarkets next year, as well as 25 new convenience stores.
This will bring an extra 700,000 people within a ten-minute drive of a Sainsbury’s store, it said.