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(Sharecast News) - Sainsbury's cautioned on Thursday that full-year profits could fall this year as the outlook is uncertain due to the impact of the war on Iran.
In the year to 28 February 2026, retail underlying operating profit nudged down 1.1% to 1.0bn, in line with guidance. This reflects significant operating cost inflation and investment in value in a more competitive market, the supermarket retailer said.
Underlying pre-tax profit was up 1.3% at 718m. Full-year total retail sales excluding fuel and VAT, rose 4.3% to 30bn, while grocery sales increased 5.2% to 24.26bn, reflecting both inflation and consistently strong volume growth, outperforming the market.
General merchandise sales fell 3.2% during the year, mainly as a result of the company's decision to allocate more space to food. Meanwhile, sales at Argos ticked up 0.7% in a "highly competitive" market. A strong summer performance was offset by subdued consumer spending over the peak Black Friday and Christmas period, Sainsbury's said.
The retailer hailed a "positive" start to the new financial year, with grocery volume growth ahead of the market, while Argos trading continues to reflect a "subdued" general merchandise market.
"We will continue to make deliberate, balanced choices to sustain this strong competitive position in the year ahead and expect to continue to outperform the grocery market," it said. "The conflict in the Middle East will impact both our customers and our business."
It said the duration and extent of these impacts is "very uncertain" and this is reflected in its profit guidance, where it currently expects to deliver total underlying operating profit of between 975m and 1.075bn.
Sainsbury's had said in a trading statement in January that it continued to expect to deliver retail underlying operating profit of more than 1bn.
Last week, rival supermarket retailer Tesco widened its guidance for 2026/27 to reflect increased uncertainty caused by the Iran war.
At 0955 BST, Sainsbury's shares were down 5% at 335.62p.
Dan Coatsworth, head of markets at AJ Bell, said: "Sainsbury's results once again show its core business is doing well, and Argos is dragging its heels. While the ongoing disappointment with general merchandise strengthens the argument for jettisoning Argos from the group as soon as possible, Sainsbury's is by no means in a bad shape. The grocery business is doing well, and the food-first strategy is clearly working.
"There is no time to sit back and relax. Competition is relentless in the grocery space and Sainsbury's now faces the prospect of a new cost-of-living crisis.
"The Middle East conflict has led to a surge in oil prices and that will feed into higher costs for consumers and businesses. Individuals will see their weekly shopping basket become more expensive, while providers like Sainsbury's will face higher input and running costs.
"Shoppers are going to have to make some big choices if they are strapped for cash. Either buy cheaper options or buy less.
"The pressure is now on Sainsbury's to keep a lid on price hikes where possible and to absorb some of the pain, so customers don't have to. Deciding to stomach some of the extra costs to keep prices low could yield benefits down the line, namely winning over more customers. But companies are typically reluctant to go down that road unless they have no other choice, and Sainsbury's might want to protect its profit margins to keep shareholders happy."
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