Shares in J Sainsbury (LON: SBRY) are down 5.5% in early trading following the release of its preliminary results for the 52 weeks ended 28 February 2026.
The decline is attributed to the company’s warning that the conflict in the Middle East will impact both its customers and its business, creating uncertainty around future profitability.
Sainsbury’s anticipates total underlying operating profit for the 2026/27 financial year to fall within a range of £975 million to £1,075 million. Despite the profit warning, the company maintains its expectation of delivering retail free cash flow exceeding £500 million.
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For the fiscal year 2025/26, Sainsbury’s reported a 4.9% increase in sales (excluding fuel) to £25.9 billion. Grocery sales demonstrated strong growth, up 5.2%, driven by consistent volume increases and expansion of market share throughout the year. Argos sales also saw a modest increase of 0.7% to £4.1 billion. However, fuel sales decreased by 8.2% to £3.6 billion.
Retail underlying operating profit declined slightly by 1.1% to £1,025 million, reflecting significant operating cost inflation and investments in value to maintain competitiveness. Statutory profit after tax rose significantly by 55.3% to £393 million, due to lower losses from discontinued Financial Services operations and reduced restructuring costs.
The company proposes a full-year dividend of 13.7 pence per share, a marginal increase of 0.7%. Additionally, Sainsbury’s has been actively returning capital to shareholders through share buybacks, completing a £200 million core buyback and returning £300 million from the disposal of its banking operations. A further £100 million from the banking exit will be returned this year, alongside a £200 million core buyback, totaling £300 million in share repurchases.
AskTraders Takeaway: The profit warning linked to Middle East uncertainties is weighing heavily on the stock. Markets will be closely watching how Sainsbury’s navigates these challenges and whether its value-focused strategy can sustain volume growth amidst rising costs.
CEO Simon Roberts stated, “More and more customers are choosing Sainsbury’s for more of their shopping, trusting us to deliver great value day in day out,” highlighting the company’s commitment to customer value amid challenging conditions.
Analyst Summary: Bull and Bear Cases
Bull Case:
- Investment in “Aldi Price Match” and Nectar Prices is successfully attracting value-conscious customers and growing market share.
- Strong performance in fresh food categories is driving overall grocery sales growth.
- A robust cost-saving program aims to deliver £1 billion in savings to mitigate inflationary pressures.
- Statutory profit after tax increased by 55.3%, and the company is actively returning capital to shareholders via dividends and buybacks.
Bear Case:
- The profit warning linked to the Middle East conflict has created significant uncertainty around future profitability.
- The company anticipates a decline in underlying operating profit for the 2026/27 financial year.
- Retail underlying operating profit has already fallen by 1.1% due to significant operating cost inflation.
- A decrease in fuel sales by 8.2% has negatively impacted overall revenue figures.
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