Published by Global Banking and Finance Review
Posted on April 17, 2025
By James Davey
LONDON (Reuters) -Sainsbury's, Britain's second largest food retailer after Tesco, forecast flat profit this year as it pledged to sustain its competitive edge if a price war emerges.
Last month, Asda, the number three player, flagged the start of a potential price war, saying it would take a hit to profits to finance price cuts aimed at reversing a slide in its market share.
Tesco responded last week, forecasting 2025/26 adjusted operating profit in a range up to 500 million pounds lower than analysts' consensus expectations prior to its update. It said it was sending a message that it has the firepower to deal with "whatever comes our way".
On Thursday, Sainsbury's, which has a UK grocery market share of 15%, forecast retail underlying operating profit, its preferred metric, of "around" 1 billion pounds ($1.32 billion) for its year to March 2026, versus 1.036 billion pounds made in 2024/25 - up 7.2% from the prior year, which was in line with expectations.
Prior to the update analysts had on average been forecasting 1.08 billion pounds for 2025/26.
The guidance "gives us all the capacity we need to make sure that above all else we can sustain the strength of our competitive position", CEO Simon Roberts told reporters.
Sainsbury's is expected to continue to grow grocery volumes ahead of the market and had started the year with "good trading momentum", it said.
Shares in the company were up 1% on relief the group's guidance was not worse, paring 2025 losses to 8.4%.
It "gives them wiggle room to fight with Tesco vs Asda if needed", Bernstein analyst William Woods said.
Most analysts say that while competition has intensified in Britain's grocery market, there is currently no irrational price war and they do not expect one. They point out the food market as a whole is still inflating, with prices in the year to March up 3%, according to official data.
Sainsbury's said retail sales rose 3.1% in 2024/25 to 31.6 billion pounds, with robust food sales offseting weakness in general merchandise.
Fourth-quarter like-for-like retail sales rose 3.7%, having been up 2.8% in the third quarter.
Sainsbury's has won market share thanks to a strategy of matching discounter Aldi's prices on key items and providing better prices for members of its Nectar loyalty scheme, financed by cutting costs. It says it has also improved the quality and innovation of its products and its customer service.
The group plans to open 15 supermarkets in 2025/26, its biggest expansion in over a decade.
It will also buy back at least 200 million pounds of shares in 2025/26 and return proceeds of 250 million pounds from the disposal of its bank via a special dividend.
($1 = 0.7571 pounds)
(Reporting by James Davey, Editing by Paul Sandle and Jan Harvey)
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