Sainsbury’s Shares Have Further Re-Rating Potential After Strong Grocery Performance

Sainsbury (LON: SBRY) shares could see further valuation upside following another year of solid grocery execution, according to analysts at Shore Capital.

Shore Capital said the retailer has delivered “another good period of Grocery execution” after completing its  FY26F, maintaining strong momentum despite a competitive UK supermarket market. 

With no year-end trading update from the company, the broker said it sees “no basis to adjust” its forecast for underlying retail EBIT of £1.02 billion for the year.

The analysts highlighted Sainsbury’s ability to grow market share during a period of increased competition, particularly after rivals stepped up price activity in 2025. 

The UK’s second-largest grocer “executed well, further progressed its value proposition and assortment,” delivering like-for-like sales growth of 3.4% in the third quarter.

Looking ahead, Shore Capital acknowledged tougher trading comparisons for the first half of FY27, similar to those faced by Tesco. However, the firm believes continued strong execution, a resilient value offering and modest store space expansion could support further earnings and free cash flow growth.

That outlook underpins a positive view on the shares. Shore Capital said the company’s progress “should underpin its deserved re-rating in an ever-volatile world,” pointing to strong free cash flow generation and improving profitability.

The analysts also highlighted the retailer’s attractive shareholder returns, supported by steady cash generation, dividends and ongoing share buybacks.

“In such a context, sound, asset-backed and cash generative UK supermarkets like Sainsbury’s harbour ongoing investor attractions,” Shore Capital said, adding that there could still be “a bit more rating expansion” for Sainsbury.