Shares in J Sainsbury PLC surged on Thursday, closing up 4% at 257.8p, making it the top performer on the FTSE 100 index.
The rally came after the British supermarket giant reported its full-year financial results, which showed a 7.2% rise in retail underlying operating profit to £1.04 billion for the 2024/25 fiscal year.
The result marks the first time Sainsbury’s has posted over £1 billion in annual operating profits, excluding one-off items.
The rebound in share price also marks a full recovery from last month’s slump, when Asda’s announcement of price cuts triggered a sell-off across the UK grocery sector.
Sainsbury’s stock, which had fallen as low as 223p during the broader market sell-off tied to political uncertainty in the United States, is now trading above the levels seen before Asda’s move.
The results appear to validate Sainsbury’s focus on core food retail operations, which performed well amid a difficult trading environment marked by rising costs and heightened price sensitivity among consumers.
Profit milestone reached, but outlook remains conservative
While Sainsbury’s reported a 38.6% jump in pre-tax profits to £384 million, this figure was supported by a strong performance in its food business and adjusted to exclude one-time restructuring costs, including the closure of in-store cafes and hot food counters.
Chief executive Simon Roberts credited the company’s progress to consistent investment in price, product quality, and customer service.
“We’ve delivered a strong set of results by staying true to our strategy of giving customers what they want: great value, quality and service,” he said.
Despite the record-breaking performance, the company struck a cautious note for the year ahead.
It forecast retail underlying operating profit of around £1 billion for the 2025/26 financial year, below analysts’ expectations of £1.08 billion.
The guidance reflects concerns about persistent inflation, higher labour and supply chain costs, and the intensifying competition in the UK supermarket sector.
Analysts find guidance “subdued” but foresee room for upside if market stabilises
While the market welcomed the past year’s strong performance, analysts offered mixed views on the outlook.
Shore Capital analysts Clive Black and Darren Shirley noted that Sainsbury’s is in a solid operational position and plans to increase market share in food retailing.
However, they acknowledged that the subdued guidance reflects a prudent approach amid a shifting competitive landscape.
“The guidance shows determination to defend value credentials following Asda’s aggressive strategy,” they wrote in a note to clients.
“It may be conservative, but leaves room for upside if market dynamics stabilise.”
RBC Capital Markets analysts Manjari Dhar and Richard Chamberlain said the lower-than-expected guidance was disappointing given Sainsbury’s strong prior performance and recent commentary from Tesco that signalled higher competitiveness across the board.
“With the sector about to be embroiled in a trade war of its own, Sainsbury is preparing for the fight with some added momentum which should provide some protection,” said Richard Hunter, head of markets at Interactive Investor.
Outlook to help Sainsbury’s manoeuvre stiff competition
The UK’s supermarket sector has entered a phase of heightened competition, with price cuts emerging as a key weapon in the battle for market share.
Asda’s decision to slash prices sent a ripple effect across the industry, forcing peers like Sainsbury’s, Tesco, and Marks & Spencer to react.
Analysts believe the outlook from Sainsbury’s is deliberately cautious, allowing room to manoeuvre should conditions worsen.
Hargreaves Lansdown’s Aarin Chiekrie described the guidance as “conservative,” roughly 8% below consensus, and said it mirrors Tesco’s approach in offering flexibility during a volatile period.
“But shy of an all-out price war, there could be room for positive surprises as the year progresses,” he added.
Despite near-term uncertainty, investor sentiment towards Sainsbury’s remains relatively positive.
According to LSEG data, eight out of thirteen analysts rate the stock a “buy” or “higher,” while the median price target stands at 300p—implying further upside potential.
As Sainsbury’s prepares for a potentially difficult year ahead, it appears to be entering the fray with both momentum and caution.
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