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

Sainsbury’s raised the lower end of its full-year profit target, yet its shares fell nearly four per cent in early trading to 346p as sales growth slowed. The reaction captures the tension in the grocer’s latest update: profitability is holding up, while customers’ spending and the pace of sales are less buoyant.

The company lifted its minimum profit target from £965m to £1.025bn, with an upper range of £1.065bn. That improvement did not prevent investors from focusing on the deceleration in like-for-like sales, which compare sales at existing stores and businesses. Growth eased to 1.2 per cent in the three months to September, down from 2.3 per cent in the comparable prior period.

Grocery, Sainsbury’s central business, also lost pace. Sales growth there slowed from 3.5 per cent to 2.2 per cent. General merchandise and clothing showed a modest improvement: their sales had fallen 3.7 per cent, and the decline narrowed to 2.9 per cent. That remains a contraction, even if the direction improved.

Food remains the strategic centre

Chief executive Simon Roberts said volume growth “has been a bit subdued through this period”. He also pointed to the strength of the previous summer, saying the company was “actually pretty encouraged by the performance we’ve seen”. Those comments place the latest slowdown in context, but they don’t change the reported figures: growth moderated across the business, particularly in groceries.

Since becoming chief executive in 2020, Roberts has steered the retailer toward its food offer. The July sale of Argos, its general merchandise business, to Swift Partners for £120m fits that direction. Sainsbury’s described the disposal as a way to create a “simpler, more focused Sainsbury’s”.

The sale also affected the reported first-half accounts. Sainsbury’s recorded a pre-tax loss of £164m, while underlying pre-tax profit rose five per cent to £366m. The contrast matters: the headline loss reflects the impact of the disposal, whereas the underlying figure shows the performance measure the company uses to describe its business apart from that effect. The two figures answer different questions and should be read together.

Within food, the company is seeking growth from higher-priced ranges as well as its wider grocery offer. Sales of Taste the Difference increased by more than six per cent in the second quarter. Roberts said demand for the range was helping drive food growth. Its still more premium Taste the Difference Discovery Range, with barbecue and Italian products, is expected to reach 200 products soon.

That performance sits alongside pressure on household budgets. Roberts acknowledged that many households are finding conditions tough and said the company aims to make good food accessible across budgets. He said more people were choosing Sainsbury’s for their weekly shop, supporting volume growth in the first half. The figures show why the mix matters: the premium range is expanding, while grocery growth overall has slowed. The update does not quantify how much either trend contributed to total sales.

Competition and costs shape the outlook

Cost pressure is another uncertainty for food retailers. The source reports that higher energy and supply costs were expected to push food inflation beyond six per cent by July next year. It also says supermarket leaders had not made clear whether the conflict cited as a cause was affecting their prices. Tesco chief Ken Murphy said he did not recognise industry inflation forecasts and had earlier said grocery price rises had not been as severe as feared. Those differing views leave the scale and timing of price pressure uncertain.

Sainsbury’s market position also remains a central measure of its progress against larger rival Tesco. Worldpanel data put Sainsbury’s share at 15.2 per cent in the year to October, down from 15.3 per cent. Tesco held 27.8 per cent. The small movement in Sainsbury’s figure points to a competitive challenge: stronger food ranges and volume growth have not yet translated into a higher recorded share over that period.

Talks with Morrisons brought that challenge into sharper focus. Sainsbury’s held discussions with the smaller rival but walked away in February after the companies disagreed over price. The episode prompted speculation about renewed consolidation among UK retailers, though the source gives no details of any further discussions or plans.

For Sainsbury’s, the next indicators are whether grocery growth stabilises, whether its food strategy can sustain customer volumes, and how costs affect pricing and margins. The higher profit target offers evidence of resilience; slower sales and a slight loss of share show that the operating picture remains mixed.