Sainsburys Expects No Profit Growth as UK Supermarket Price War Intensifies

Britain’s second-largest supermarket chain Sainsbury’s has forecasted flat profits for the upcoming year as it prepares for escalating costs and heightened competition amidst a looming supermarket price war. The retail giant, commanding a 15% market share, projects retail underlying operating profits of approximately £1 billion in the new financial year.

Recent financial results reveal the grocer, which owns Argos and Habitat, achieved retail underlying operating profits of £1.03 billion in the current financial year, marking a 7.2% increase from the previous period. Underlying pre-tax profits reached £761 million, surpassing analysts’ expectations of £751 million and showing an 8.6% year-on-year growth.

The cautious outlook emerges as competition intensifies within the grocery sector, particularly following Asda chairman Allan Leighton’s announcement of renewed focus on pricing strategies backed by substantial investment. Tesco’s leadership has already acknowledged that Asda’s recent price reductions have heightened market competition, potentially impacting sector profitability.

Despite challenging market conditions, Sainsbury’s grocery division demonstrated resilience with a 4.2% sales increase over the year, while fourth-quarter performance showed 4.1% growth. These gains were attributed to aggressive price-matching strategies with discount retailer Aldi.

The group’s Argos division continues to face headwinds, recording a 2.7% annual sales decline to £4.9 billion, though showing modest improvement with a 1.9% increase in the final quarter. General merchandise and clothing operations delivered more positive results, achieving a 4.5% sales increase to £1.9 billion.

Chief Executive Simon Roberts highlighted the company’s £1 billion investment in price reductions, emphasising Sainsbury’s commitment to maintaining competitive positioning. The supermarket chain has also announced a £200 million share buyback programme and a special dividend of £250 million, demonstrating confidence in its strategic direction despite market uncertainties.