Sainsbury’s warning that the Iran war will hit profits has spooked the City.
Shares in the supermarket plunged 5.8% on Thursday morning, after the retailer told investors underlying profits would remain flat or even fall in the year to come.
“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 our profit guidance, where we currently expect to deliver total underlying operating profit of between £975m and £1.08bn.”
The guidance trails analyst consensus of £1.1bn. Warnings of a “subdued” general merchandise market likewise quietened hopes for any improvement in Argos’ performance. General merchandise sales were down 3.2% in the year.
Not contained to its own stock, Sainsbury’s pessimism over market conditions also dragged down Tesco’s share price 2.9% in the morning.
Read more: Sainsbury’s gains clouded by Iran uncertainty
Tesco had already been punished by the City last week for its caution when it widened its guidance to £3bn-£3.3bn.
Even if Sainsbury’s hits the midpoint of its guidance, the supermarket’s underlying operating profit will have remained flat for three years amid a race for market share.
“We assume Sainsbury’s is guiding prudently amid the uncertainty,” said Barclays analyst Matthew Clements.
Continued pressure on profits will come from Sainsbury’s dedication to winning market share. Having achieved its sixth year of volume share gains in FY26, the supermarket has kicked off FY27 with further gains in grocery.
CEO Simon Roberts emphasised an “absolute focus” on keeping Prices low in the year to come.
“The conflict in the Middle East means customers are even more focused on the cost of living and we are absolutely committed to making sure everyone gets the best possible value when they shop with us,” he said.
AJ Bell head of markets Dan Coatsworth said: “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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