Sainsbury’s has warned profits will flatline this year as it gears up for a price war.
Britain’s second-largest grocer echoed rivals by saying that its profits will not grow as it battles to win more customers.
Chief executive Simon Roberts said it was ‘committed above all else’ to being the ‘most competitive we’ve ever been’.
And it announced its ‘biggest investment in expanding our store space in over a decade’ as it opens 40 new shops this year.
Analysts said this would bolster it against rival Tesco and discounters Aldi and Lidl. But profits for the year to March 2026 will be around the same as last year’s – at £1billion.
The update came just a week after Britain’s number one grocer Tesco said it was ready to take a £400million hit to profits this year as competition intensifies.
Price war: Sainsbury’s chief exec Simon Roberts (pictured) said it was ‘committed above all else’ to being the ‘most competitive we’ve ever been’
Russ Mould, investment director at AJ Bell, said: ‘Like Tesco, Sainsbury’s wants to equip itself to protect its competitive position, hence its guidance for flat profit in the coming year.
‘The main winners in a price war would ultimately be shoppers.’
Sainsbury’s said that its profits grew 7.2 per cent to £1.03billion for the year to February 28.
Annual sales grew 4.2 per cent to £26.6billion as it attracted more customers with its Aldi price match and Nectar loyalty scheme. Roberts insisted it had ‘created a winning combination of value, quality and service that customers love’.
The business has spent £1billion lowering prices over the past four years as it contended with surging popularity for Aldi and Lidl.
Roberts said: ‘There’s a lot of noise out there at the moment.’
He added: ‘What is really clear is customers, make choices every day on where they think they can get the best value and when they trust that value.’
The supermarket has 15.1pc of the market, according to market research firm Kantar.
But group performance last year was hit by a 2.7 per cent fall in sales at Argos, which Sainsbury’s bought in April 2016 for £1.4billion.
‘Argos is a drag that needs to improve,’ said Shore Capital analyst Clive Black. Shore Capital, which is the grocer’s house broker, slashed its own profit forecasts for the group and said that this was a sign that Sainsbury’s ‘is determined to hold on to its strengthened value credentials’.
However, there has been ‘good trading momentum’ in the current financial year so far across both Sainsbury’s and Argos, the company said.
The prospect of a price war was ignited after Asda’s executive chairman Allan Leighton recently said that he will cut prices to turn Britain’s number three supermarket around.
Listed grocers, including Marks & Spencer and Tesco, had billions of pounds wiped off their value after Asda threw down the gauntlet last month in a bid to win back shoppers.
But Sainsbury’s shares have since recovered almost all their losses from Asda’s announcement on March 13, and shares yesterday rose 3.6 per cent, or 8.8p, to 256.8p.
The prospect of a price war will be welcomed by squeezed consumers after Kantar said that grocery price inflation had hit 3.5 per cent in March, which was up 0.2 percentage points from February.
A fierce battle to win customers comes as the nation’s retailers face a cocktail of higher costs this year, including employers’ National Insurance contributions.
Sainsbury’s announced plans to cut 3,000 staff earlier this year in the wake of Labour’s Budget.
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