Sainsbury’s (LSE: SBRY) is doing everything a supermarket should be doing in 2025, beating expectations, growing volumes, winning over grocery shoppers, and banging the drum about value. Yet the market barely flinched.
The supermarket group posted a 4.9% jump in retail sales (excluding fuel) for the 16 weeks to 21 June, comfortably ahead of the 3.6% consensus. Grocery, general merchandise, clothing, all in the green. Even Argos, long seen as the group’s more sluggish arm, managed a 4.4% lift. It was, by most metrics, a strong trading update.
And yet, shares in Sainsbury’s dipped. So what gives?
It seems the market had already priced in much of the good news, or at least decided that solid performance in a competitive, low-margin sector isn’t enough to push the stock higher.
Sainsbury’s has been quick to tout its record customer satisfaction scores, expanding Aldi Price Match coverage and a rising market share, now at its highest in nearly a decade. But investors appear cautious.
Perhaps it’s the lack of a real earnings upgrade. The group reiterated guidance for underlying retail operating profit of around £1 billion this year, flat on last year, and free cash flow slightly over £500 million. The numbers are fine. Just not exciting.
Sainsbury’s is pressing ahead with its ‘More for More’ strategy, shifting store space towards food and leaning harder into loyalty and personalisation, with up to 500 million weekly Nectar offers now in play. It’s all sensible, steady stuff. But the story remains retail margins under pressure and a market that wants more than resilience, it wants leverage.
Until there’s a clearer route to earnings growth beyond defensive execution, Sainsbury’s may find that no matter how many Taste the Difference quiches it sells, investors aren’t biting.