Sainsbury’s shares were lower on Thursday as investors checked out following a warning on the impact of the Middle East war on its customers.
The warning overshadowed what was otherwise an upbeat set of preliminary results, with grocery sales rising 5.2% to drive total Sainsbury’s sales (ex-fuel) to £25.9bn, up 4.9%.
Retail underlying operating profit came in at £1,025m for 25/26, marginally down on last year as the group chose to absorb cost inflation rather than pass it all through, alongside a 5% pay rise for colleagues and continued investment in price.
“Sainsbury’s is enjoying some time in the sun, hitting upgraded profit expectations thanks to solid revenue growth and gains in volumes and market share,” explained Duncan Ferris, Investment Writer at Freetrade.
“But conflict-led uncertainty, and its impact on consumers, is clouding things for the supermarket, with its guidance leaving room for a further drop in annual operating profits and a weaker free cash flow.”
Guidance for 2026/27 is total underlying operating profit of £975m–£1,075m, with retail free cash flow expected to top £500m. The fairly wide range of the profit outlook means Sainsbury’s could see profits fall over the next year.
This was unacceptable for some investors who may look to Sainsbury’s for relative stability and reliability, and shares were down around 5% on Thursday.
“While free cash flow remains robust and the progressive dividend offers an attractive yield, there is now some more uncertainty on the horizon. Many investors will have had a good run in Sainsbury’s over the last 2 years, and this update may be triggering some profit taking,” said Adam Vettese, market analyst for eToro.