Sainsbury’s (LSE: SBRY) share price has dropped 15% year-to-date as the UK’s second-largest supermarket prepares to unveil its full-year results next week on 17 April.
The poor performance comes amid a broader sell-off in supermarket stocks, with more than £4bn wiped off the combined value of Tesco, Sainsbury’s and Marks & Spencer in March alone. Investors have grown increasingly wary of the intensifying price war initiated by rival Asda, which slashed prices across 10,000 products since late January in a desperate bid to regain market share.
Despite the share price weakness, market watchers remain cautiously optimistic about Sainsbury’s prospects. Analysts project healthy profits for the fiscal year, with expectations of continued growth in the grocery segment supporting overall performance targets.
Sainsbury’s grocery division has shown promising signs, with strengthened value positioning and improved store operations contributing to volume growth and sustainable market share gains. The company’s strategic investments appear to be paying dividends in a highly competitive market.
The supermarket continues to expand its food footprint, converting former Homebase sites across the UK. These conversions are expected to boost operating profits in the coming fiscal years as they become fully operational.
However, Sainsbury’s isn’t immune to the challenges facing the sector. Rising food inflation, currently in the 2-3% range, could potentially double by 2026 due to increased labour and environmental compliance costs. The company also faces growing pressure from discount retailers Aldi and Lidl, though it has maintained its market share above 15%.
Tesco’s announcement recently that profits will fall this year due to the price war has only heightened anxiety among Sainsbury’s shareholders. Coming off recent lows, the shares have shown modest signs of recovery, trading up slightly over 1% in in Friday’s trading sessions ahead of next week’s results.
Shore Capital believe Sainsbury’s shares look undervalued at current levels, potentially representing a buying opportunity for investors. The supermarket’s Nectar prices initiative and Aldi price match strategy have helped stem customer losses, while its premium Taste the Difference range continues to perform well, delivering double-digit sales growth during the Christmas period.
For investors focused on income, analysts anticipate an increase in dividend payments compared to the previous year, with further growth projected for fiscal 2026.
As Sainsbury’s prepares to release its results, all eyes will be on fourth-quarter like-for-like sales growth and any commentary on the company’s battle plan against intensifying supermarket competition and price pressures.