Sainsbury’s (LSE: SBRY) has found its rhythm again. Sales are up, customer numbers are growing, and the supermarket is sitting on its highest grocery market share in almost a decade. Management says the strategy is working. The market seems to agree. Shares have climbed 11% so far this year.
But zoom out, and the picture becomes more muted. The share price today is almost exactly where it was back in 2023. For all the recent buzz, Sainsbury’s stock has gone nowhere fast. That’s not a disaster. Stability has its own appeal in a volatile market. But it also raises the question of whether this is as good as it gets.
The fundamentals don’t look stretched. The forward price-to-earnings ratio is just over 10, slightly below Tesco’s. The dividend yield is respectable at around 5%, and the business is expected to hand investors a £250 million special payout later this year. That’s on top of rising regular dividends, forecast to grow to 15.1p by 2027. Cash flow is improving. Debt is under control.
On paper, it’s a decent package. But not an exciting one.
The recent trading update sounded confident. Like-for-like sales rose 4.9% over 16 weeks, helped by loyalty schemes and its increasingly aggressive ‘Aldi Price Match’ programme. That strategy is pulling in shoppers, but without profit figures, it’s hard to know what’s being sacrificed to fund it.
Supermarkets always face margin pressure, but this feels like a particularly tight squeeze. There’s been no full-blown price war yet, but the signs are there. If Sainsbury’s wants to keep growing volume, it may need to keep undercutting rivals. That’s tricky, especially with discount chains still gaining ground.
So, is the stock worth buying now?
It depends what you’re looking for. As a low-volatility, dividend-paying retailer, it has appeal. The valuation isn’t demanding, and the recent improvement in market share could signal that the worst is behind it. But don’t expect a big jump. Sainsbury’s has been working hard just to keep its share price flat for two years.
Without clearer profit growth, it risks staying stuck in the middle, not cheap enough to be a bargain, not strong enough to be a growth story.
For now, the company is holding its ground. That’s not nothing. But it’s also not quite enough to shout about.