Investors in Sainsbury’s will be watching closely this week to see whether the supermarket can sustain its recent momentum amid mounting economic uncertainty linked to the Middle East conflict.
Shares in the UK’s second-largest grocer are trading near a 12-year high, supported by steady gains in market share and a strategy centred on price investment and premium offerings. Strong demand for its Taste the Difference range has boosted sales, while efforts to improve value perception have attracted cost-conscious shoppers.
Analysts expect the retailer to report underlying pre-tax profits of around £730 million when it updates the market on April 23, a modest 3% increase year-on-year. Higher revenues and efficiency savings are forecast to offset pressures from rising labour costs and higher taxation.
However, attention is likely to shift from past performance to the outlook. The ongoing conflict in the Middle East has already pushed up fuel costs, with potential knock-on effects for supply chains, logistics and consumer spending.
Rival Tesco has already warned that the situation has increased uncertainty around its full-year guidance, signalling wider concern across the grocery sector.
Industry groups, including the Food and Drink Federation, have cautioned that sustained energy price increases could drive food inflation above 9% this year, posing a risk to household budgets and retail demand.
Despite these headwinds, Sainsbury’s enters the update on a relatively strong footing. Its last trading statement showed a 5.1% rise in grocery sales over the Christmas period. However, performance in other areas was more mixed, with weaker sales in Argos and its clothing division.
Investors will now be looking for evidence that the group can sustain growth, protect margins and potentially increase shareholder returns, even as external pressures threaten to weigh on both costs and consumer confidence.
Danni Hewson, AJ Bell head of financial analysis, said: “After recently upgrading free cash flow guidance to more than £550 million, there will inevitably be hopes of further share buybacks on top of another increase in the dividend.
“Though an uncertain backdrop might cause management to be more circumspect.”
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