By James Davey
Sainsbury's LSE:SBRY, Britain's second-largest supermarket group, on Tuesday joined industry leader Tesco LSE:TSCO in reporting slower underlying sales growth in its first quarter, but left its full-year profit guidance unchanged.
The Middle East conflict has pushed up energy prices, weighing on consumer confidence and spending, and adding to the challenges facing the UK retail sector and wider economy.
Sainsbury's, which has a UK grocery market share of 15.3%, said like-for-like sales, excluding fuel, rose 2.1% in the 16 weeks to June 20 - below the 3.1% achieved in the previous quarter.
Grocery sales rose 3.6%, while general merchandise and clothing sales fell 3.7% and sales at Argos fell 0.5%.
The group was up against a strong comparative performance in the first quarter last year when like-for-like sales rose 4.7%, boosted by favourable weather and cyberattack-related disruption at competitors Marks & Spencer 42TE.L.
Analysts at Bernstein said Sainsbury's reported "an overall encouraging set of results with continued strength in grocery and better than feared Argos performance."
Earlier this month, Tesco reported first quarter like-for-like sales growth slowed to 1.8%.
About one quarter of Sainsbury's sales are non-food, making it more exposed than Tesco to any slowdown in discretionary spending.
"We have had an encouraging start to the year but the impact of the conflict in the Middle East on our customers and our business remains uncertain," Sainsbury's said, with CEO Simon Roberts noting that "customers are looking for value now more than ever."
The group kept its forecast for full-year 2026/27 total underlying operating profit of between £975 million and £1.075 billion ($1.29 to $1.42 billion). It made £1.025 billion in 2025/26.
Prior to Tuesday's update analysts were on average forecasting £1.061 billion for 2026/27.
Shares in Sainsbury's have risen 14% over the last year.