Sainsbury’s Shares Fall as Sales Growth Slows Despite Higher Profit Target

Sainsbury’s lifted the lower end of its full-year profit target, yet its shares fell as investors weighed that improvement against slower sales growth. The UK’s second-largest supermarket’s stock dropped by nearly four per cent in early trading to 346p. The move puts the focus on a central question for the grocer: can stronger profit performance hold if the pace of customer spending eases?

The company raised the lower end of its full-year profit target from £965m to £1.025bn, with an upper range of £1.065bn. That higher floor signals greater confidence in the profit outlook. But the trading figures also show that growth moderated across the business in the three months to September, particularly in its largest category, groceries.

Food growth cools, while other categories recover

Like-for-like sales growth slowed from 2.3 to 1.2 per cent over the period. Grocery sales growth eased from 3.5 to 2.2 per cent. General merchandise and clothing, by contrast, improved slightly: sales in those areas moved from a decrease of 3.7 to 2.9 per cent. The figures suggest that food remains the key driver, even as its recent growth rate has come down.

Chief executive Simon Roberts acknowledged that volume growth “has been a bit subdued through this period”. He also pointed to the strength of the previous summer’s performance, saying Sainsbury’s was “actually pretty encouraged by the performance we’ve seen”. That comparison matters: a slower rate can reflect both current trading and the level of activity in the period being compared with. The available figures do not break down how much each factor contributed.

Roberts has steered the business towards food since becoming chief executive in 2020. In July, Sainsbury’s sold Argos, the general retailer it owned, to Swift Partners for £120m. The sale narrows the group’s focus, but it also affected the reported result: Sainsbury’s recorded a pre-tax loss of £164m in the first half. Underlying pre-tax profit, which excludes the effect of some items, rose by five per cent to £366m.

Roberts told shareholders the disposal would help create a “simpler, more focused Sainsbury’s”. The distinction between the reported loss and underlying profit is important for readers assessing the period. The disposal pushed the headline pre-tax figure into a loss, while the underlying measure showed improvement in the company’s ongoing performance. The two figures describe different things and should be read together.

Premium food offers a growth lever

Sainsbury’s says demand for its Taste the Difference range is supporting food sales. The range’s sales grew by more than six per cent in the second quarter. Roberts said the higher-priced Taste the Difference Discovery Range, with barbecue and Italian products, would soon include 200 products. Its expansion gives the grocer more premium items to sell, although the source figures don’t show what share of total grocery sales these products represent.

That growth sits alongside pressure on household budgets. Roberts said many households were finding conditions tough and described the company’s effort to offer good food at different price points. He also said more people were choosing Sainsbury’s for their weekly shop, driving continued volume growth in the first half. The figures supplied do not quantify the change in customer numbers or separate the contribution of premium products from more affordable ranges.

For customers, the mix of value and higher-priced food is a key part of the picture. Premium products can support sales growth, while the wider offer needs to remain accessible to shoppers under pressure. Whether that balance can sustain volumes is one of the questions to watch in future updates. Sainsbury’s comments point to continued volume growth in the first half, but its more subdued volume performance in the latest period shows why the pace of that growth is under scrutiny.

Market share and Morrisons talks add context

Sainsbury’s market share slipped from 15.3 to 15.2 per cent in the year to October, according to Worldpanel data. Tesco remained the market leader on 27.8 per cent. The small decline leaves Sainsbury’s well behind its largest rival and adds another measure against which investors can judge its effort to grow. A single market share reading doesn’t explain the causes of a change, but it shows that higher profit expectations and sales growth haven’t yet translated into a stronger position on this measure.

That competitive gap has drawn attention to Sainsbury’s discussions with Morrisons, a smaller rival. Sainsbury’s walked away from the talks in February after the two sides disagreed over price. The existence of those discussions has prompted speculation about whether consolidation could reshape the UK retail sector, but the source provides no terms for a possible deal and no indication that discussions have resumed.

For now, the company’s near-term story rests on its raised profit floor, slowing like-for-like sales growth, and ability to hold grocery volumes while serving customers across price points. The Argos disposal changes the shape of the business, while premium food offers one source of growth. Future trading figures will show whether that focused approach can support sales momentum and market share as household budgets remain stretched.