Sainsbury’s Shares Continue Decline Despite ‘Best Ever Christmas’

Sainsbury’s (LON: SBRY) shares continued their downward trajectory, falling more than 3% on Thursday and slipping over 2% further in early Friday trading, now standing at 552.7p. 

The stock has remained in somewhat of a daily ranging pattern since early 2023 and is now heading towards the lower end of the range despite a couple of attempts to break higher in 2024.

However, Friday’s decline comes despite the retailer reporting a strong Christmas trading period with record sales.

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In its third-quarter trading update, Sainsbury’s posted total sales growth of 3.7% for the 16 weeks ending 4 January 2025. 

Grocery sales were particularly robust, rising 4.1%, while the retailer also noted a 3.8% increase during the critical Christmas period. Total retail sales, excluding fuel, came in at 2.7%, while like-for-like sales, also excluding fuel, were up 2.8%

Chief Executive Simon Roberts highlighted the company’s success in winning grocery market share for the fifth consecutive Christmas and achieving its highest-ever sales in the days leading up to the holiday.

Despite the positive results, the market reacted negatively, which may be due to concerns over higher operational costs and broader economic headwinds, with various retail names declining recently as the UK budget is expected to have a significant impact on the economy.

Roberts acknowledged a “particularly tough cost inflation environment” but expressed confidence in the retailer’s strategy, including a 5% pay raise for hourly-paid colleagues.

Sainsbury’s sees full-year retail underlying operating profit in the range of £1,010-£1,060 million, reflecting around 7% growth. The retailer also aims to generate at least £500 million in free cash flow.

It now expects total Financial Services underlying operating profit to be around £30 million compared to the previous guidance of between £15 million and £25 million.