Judging by how well shares in Sainsbury’s (SBRY) have held up during the global market sell-off, investors are betting the UK’s second-largest supermarket chain won’t deliver a nasty surprise when it reports its results for the year to the end of March on 17 April.

The firm published an ‘aide-memoire’ a few months ago repeating its guidance from the third quarter that underlying operating profit for the retail business would be in line with consensus and the midpoint of its target range of £1.01 billion to £1.06 billion representing 7% growth on the previous year.

The increase is mainly expected to come from continued operating leverage from volume growth in grocery, an uplift in the profit contribution from the Nectar card programme and cost savings.

Financial services profit is seen slightly above the previous range at around £30 million, while retail free cash flow should be at least £500 million.

It has been helped by weak performances from Asda and Morrisons, both owned by private equity, and by shoppers turning away from the discounters.

However, the first three months of 2025 have seen Aldi and Lidl return with a vengeance, taking their combined market share for the 12 weeks to 23 March to a new record of 18.8%, even though Sainsbury racked up its 35th consecutive month of rising sales.

Promotions ramped up to 28.2% of total grocery spending in March, the highest level for four years, which is good news for customers but not great for shareholders.

Therefore, investors will need to watch for comments on whether Sainsbury’s is planning to invest heavily in pricing in 2025 to protect its market share at the expense of profits, or whether it can rely on Nectar, operational leverage and cost efficiencies to drive earnings growth. 

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