J Sainsbury (LON:SBRY) executives highlighted market share gains, higher sales, resilient profits and strong cash generation in the grocer’s FY 2025-2026 preliminary results, while warning that uncertainty tied to conflict in the Middle East could create new cost and supply chain pressures.
Food-led momentum, share gains and a bigger “big trolley” customer base
Chief Executive Simon Roberts said the company’s performance continued to be driven by its “winning combination of value, quality, availability, and service,” supported by investments in lower prices on frequently bought items, strengthened food ranges and improved availability.
Roberts said Sainsbury’s loyal customer base has expanded by 1.2 million more primary customers compared to five years ago, which he cited as a key foundation for investing in additional food space, rebalancing space toward fresh food in existing stores and opening new locations.
Fresh food, value strategy and premium growth
Roberts emphasized “center of the plate” categories—meat, fish, poultry and produce—as central to its food strategy. He said fresh food has been a differentiator, with fresh food sales growth of 8% in the year and fresh food volume performance “almost five times ahead of the rest of the market.”
On value, Roberts said the company invested more in Aldi Price Match during the year across supermarkets and convenience. He also highlighted the role of personalized loyalty offers, noting that value indices shown do not capture the impact of personalized “Your Nectar Prices,” which he said would strengthen Sainsbury’s value position versus competitors.
Roberts also described premium own-brand momentum, saying Taste the Difference was the “fastest-growing premium own-label brand in the market,” surpassing GBP 2 billion in sales. He said Sainsbury’s introduced more than 1,200 new own-brand products in the year, over half in Taste the Difference, and had “more than 600 new products” planned for the first half of the new financial year.
Financial results: sales growth, profit resilience and cash returns
Chief Financial Officer Bláthnaid Bergin reported that Sainsbury’s sales grew 4.9% for the 52 weeks ended Feb. 28, 2026, driven by “consistently strong grocery volume growth and market share gains.” General merchandise sales declined year-over-year “largely as planned” due to space being reallocated to food, though clothing was a bright spot, with “strong volume growth of nearly 6%.”
Bergin said Argos sales rose 0.7% for the year, with growth in the first half but a decline in the second half amid subdued spending around Black Friday and Christmas. Total retail sales grew 4.3% excluding fuel and 2.8% including fuel.
On profitability, Bergin said retail underlying operating profit fell 1.1% to GBP 1.025 billion, reflecting higher employment and regulatory costs and investments in value, customer service and quality, partially offset by volume outperformance and cost savings. Argos operating profit was “broadly flat” year-over-year, with higher volumes partly offset by higher online traffic costs and wage inflation, and weaker second-half profitability due to lower average selling prices.
Group underlying profit before tax rose 1.3%, “predominantly driven by higher financial services profitability against last year’s restated loss,” while underlying EPS increased 3.2% due to a reduced share count from buybacks. Bergin said the underlying tax rate was around 29%, lower than prior guidance of around 30%, and the company expects a similar rate in the year ahead.
Sainsbury’s recorded GBP 128 million of non-underlying costs, including GBP 74 million of retail restructuring costs tied to redundancies in central management structures and costs related to closing food counters and converting cafés and bakeries. The company also incurred GBP 29 million in discontinued operations related to its banking exit.
On cash flow, Bergin reported retail free cash flow of GBP 574 million, up year-over-year, driven by higher EBITDA, working capital management and reduced pension contributions. She said a working capital inflow was “primarily the result of a successful project on payment terms.” Net debt metrics improved modestly, and net debt to EBITDA stayed flat at 2.6x within a 2.4x-3x target range.
The company returned GBP 816 million to shareholders during the year, including ordinary dividends of GBP 316 million, a GBP 200 million core buyback, and additional returns tied to banking proceeds (a GBP 250 million special dividend and a GBP 50 million incremental buyback). Bergin said another GBP 100 million of bank proceeds will be returned in the current financial year alongside a GBP 200 million core buyback. The proposed full-year dividend per share was 13.7, a payout ratio of 61%, up 1% year-over-year, with an intention to reduce the payout ratio over time toward ~50%.
Bank exit, financial services reshaping and reporting changes
Bergin said Sainsbury’s completed the sale and migration of core banking products during the year, including loans, credit cards and savings to NatWest, and the Argos Financial Services book to NewDay. Legacy results are now included in non-underlying discontinued operations.
She said the company plans to surrender its banking license by July 2026 and will shift to a “simpler, more focused financial services model” integrated into retail operations. As a result, it will no longer report Financial Services as a separate segment, folding ongoing contributions—such as Argos Care, commission income and white-label banking products—into retail reporting.
During Q&A, Bergin said the company remained comfortable with consensus assumptions that financial services would contribute around GBP 20 million this year and grow to GBP 40 million next year, embedded in retail operating profit guidance.
Outlook: profit guidance, inflation uncertainty and investment priorities
Management reiterated its focus on maintaining competitiveness while navigating external uncertainty. Roberts said the company had a “positive start to the year,” with continued volume outperformance and strong Easter trading, while noting general merchandise demand remains subdued.
For the year ahead, Roberts said Sainsbury’s expects to deliver retail profit growth and provided guidance of GBP 975 million to GBP 1.075 billion, reflecting uncertainty around potential impacts of the Middle East conflict on customers and the business.
Roberts discussed inflation risks, saying fresh food can see cost pressures pass through faster than packaged goods due to energy intensity across production and supply chains. He said the company would continue to make “balanced choices” to mitigate inflation where possible while delivering for stakeholders, and described expectations for a “very rational market.”
On investment, Bergin reiterated the company’s capital expenditure envelope of GBP 800 million to GBP 850 million for the current year, saying Sainsbury’s would make choices within that envelope while remaining focused on cash generation and maintaining the commitment to at least GBP 500 million of retail free cash flow in FY 2027.
Roberts also detailed strategic initiatives across channels and capabilities, including online grocery sales growth of 13%, 70% growth in on-demand food through third-party platforms (now more than GBP 700 million in sales), and continued store investment through “More for More,” where invested stores added about 1,000 food items on average and outperformed the broader estate in the second half.
He highlighted technology as a competitive lever, citing the creation of an AI Centre of Excellence and “more than 200 live use cases,” including SmartShop loss reduction tools, an optimized price reductions tool to reduce waste and save colleague time, and a personalization engine targeting “500 million personalized offers each week.”
In Argos, Roberts said the business is pursuing “More Argos, More Often,” supported by a dedicated leadership team and cost focus. He also said Argos plans to “take a big leap forward” with the launch of a marketplace proposition, building on supplier direct fulfillment to expand range without carrying inventory.
About J Sainsbury (LON:SBRY)
J Sainsbury plc is one of the UK’s leading food, general merchandise and clothing retailers.
Offering delicious, great quality food at competitive prices has been at the heart of what we do since we opened our first store in 1869. Today, inspiring and delighting our customers with tasty food remains our priority. Our purpose is that driven by our passion for food, together we serve and help every customer.
Our focus on great value food and convenient shopping, whether in-store or online is supported by our brands – Argos, Habitat, Tu, Nectar and Sainsbury’s Bank.
