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J Sainsbury warned its profits would flatline this year as defending its competitive position was the top priority amid a brewing price war.
The UK’s second-largest grocer said on Thursday it expected to make underlying operating profit of about £1bn from its retail business in the current financial year, which runs until March 2026, roughly in line with the previous year.
Chief executive Simon Roberts said the group was committed “above all else” to maintaining its “strong competitive position” and to ensuring customers get “great value”.
The comments come after larger rival Tesco said last week that profits would be lower this year to give it more wriggle room to cut prices, and Asda signalled the start of a potential price war in March, wiping £4bn off the value of UK-listed grocers.
Sainsbury’s shares rose as much as 4 per cent in morning trading in London, trimming this year’s decline to 8.8 per cent.
Analysts at Bernstein said the company’s “vague” profit guidance was 8 per cent below analysts’ consensus but it gave Sainsbury’s the option “to fight with Tesco [and] Asda if needed”.
Roberts echoed Bernstein’s assessment, saying the guidance allowed Sainsbury’s the flexibility to respond if competitors cut prices significantly.
However, he added that “our competitive position is as strong as its ever been and we’ve not done anything different in recent weeks [on price] in response to the noises out there”.
The supermarket chain said it had invested £1bn into holding down price rises over the past few years, a time of huge inflationary pressures. That investment has helped Sainsbury’s gain market share from rivals.
Asda’s new executive chair, Allan Leighton, has put price cuts at the centre of his plan to revitalise the UK’s third-largest supermarket chain, which has been losing market share to Tesco and Sainsbury’s.
Sainsbury’s posted retail underlying operating profit, its preferred metric, of just over £1bn for the 12 months to March 2025, up 7.2 per cent on the previous year. It said that profit growth of more than 10 per cent at Sainsbury’s had been partially offset by lower profits at sister business Argos.
Retail sales, including VAT and excluding fuel, rose 3.1 per cent to £31.6bn. Like-for-like and group sales growth were in line with analysts’ expectations at 3.2 per cent and 3.1 per cent, respectively.
In the fourth quarter, like-for-like retail sales rose 3.7 per cent, up from 2.8 per cent in the previous three months.
The supermarket also announced a share buyback of at least £200mn this year and confirmed the return of £250mn to investors from the bank sale through a special dividend.
Separately, Roberts again called on the UK government to close the £135 import duty loophole for low-value parcels. UK retailers have raised concerns that the severity of US tariffs on China will prompt Chinese importers to dump low value consumer goods in the UK.
“Action need to be taken to make sure that everyone is paying their tax . . . It needs to be a level playing field for everybody,” he said.
