Sainsbury’s Joins Tesco In Warning Price War Could Impact Profits But Ramping Up Store Expansion Programme
Days after Tesco forecast lower profits to give it the flexibility to reduce prices in response to Asda’s Rollback, Sainsbury’s expects its earnings to flatline in 2025.
Following today's robust annual results, they expected £1bn retail operating profit this fiscal, far below the Tesco's potential £400m hit.
CEO Simon Roberts stressed it will sustain its “strong competitive position” and ensuring customers get “great value”.
The pledge comes weeks after Asda’s Chairman Allan Leighton said that his business was prepared to take a significant hit to its profit to finance a shift to a new ‘Asda Price’ that is 5% to 10% lower than its rivals to recover lost market share.
Richard Hunter, head of markets at Interactive Investor:
“In market share, Sainsbury’s and Asda are more closely linked with numbers of 15% and 12.5% i.e. Sainsbury’s rather than Tesco who could be under most pressure.
In 12 months to 1-3-2025, Sainsbury’s group retail underlying operating profit was up 7.2% to £1.04bn, i.e. double-digit grocery growth diluted by lower profits at Argos. Pre-tax profit up from £277m to £384m.
Total full-year retail sales up 3.1% to £31.56bn, like-for-like growth of 3.2% vs Q4 up 3.7% vs 2.8% Q3
Total grocery annual sales 4.2% after Q4 up 4.1%.
Argos, annual sales down 2.7% vs Q4 1.9% rise.
Sainsbury’s price drops via Aldi Price Match and Nectar Prices, record levels of Customer satisfaction re availability.
Plans for its biggest store opening programme “in over a decade”.
They bought 14 new supermarket sites last fiscal Homebase and Co-op.
Inc organic store openings they plan 15 supermarkets in 2025/26, i.e. over 400,000 sq. ft. new space + 25 new convenience stores in 2026/27.
Roberts: “We’ve transformed our business in 4 years, a winning combination of value, quality and service that customers love, investing £1bn in lowering our prices.
“... Sainsbury’s as their main grocery shop, highest market share gains in over 10 yrs. We are committed, above all else, to sustaining our strong competitive position we have built and we expect to continue to outperform the market.
“ ...our largest investment in expanding our store space in over a decade via new supermarkets in key new locations and extend food space...”
NamNews Implications:
* The added uncertainties of Trump tariffs…
* …gives retailers the ’excuse’ to wait and see outcomes.
* i.e. postpone any plunge into a UK price war.
* But also manage stock market expectations, should Asda take an extra plunge.
* (Besides, whilst Asda management may have permission to make threats…
* …this may not include the funding of a prolonged price war)
* Meanwhile, retailers like Sainsbury’s and Tesco with strong balance sheets and considerable momentum…
* …may now want to preserve their ‘wealth’ following Trump’s announcements.
* And await an Asda blink…
SainsburysResults
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