Sainsbury’s underlying profit rises as Argos sale reshapes results

Sainsbury’s reported a 3.6% rise in underlying operating profit from continuing operations to £525m for the first half of its financial year, supported by grocery volume growth and cost savings as the disposal of Argos changes the structure of its reported accounts.

Sales from continuing operations excluding fuel reached £14bn in the 28 weeks to 12 September 2026, an increase of 2.6%. Grocery sales advanced 2.9% to £13.2bn, according to the company’s interim results published on 22 October.

The retailer posted a statutory loss after tax of £164m for the period, compared with a £155m profit a year earlier. The figures include a £376m loss after tax in discontinued operations, while continuing operations delivered £212m in statutory profit after tax. The distinction is central to interpreting the headline loss. The statutory group loss therefore does not mean that Sainsbury’s continuing grocery business was loss-making.

Underlying profit before tax from continuing operations rose 5.2% to £366m. The retailer generated £333m of free cash flow, compared with £276m in the preceding first half, and remains on track to deliver more than £500m over the full financial year.

Sainsbury’s has also completed £200m of its previously announced £300m share buyback programme and expects to purchase the remaining £100m during the second half. Its interim dividend remains 4.1p per share.

Management now expects underlying operating profit from continuing operations of between £1.025bn and £1.065bn for the year. The range reflects trading assumptions and remains guidance rather than a completed financial outcome.

The results illustrate the importance of separating operational performance from portfolio restructuring. Selling a major retail brand can trigger accounting charges and changes to the classification of assets and liabilities, even while the retained business generates more operating profit and cash.

For suppliers and property partners, the changes may also alter commercial relationships. Grocery investment decisions will be evaluated against a more focused group structure, while the disposal of Argos changes Sainsbury’s exposure to general merchandise and consumer electronics demand.

Competitive conditions remain demanding. Major UK grocers have to balance shelf prices, promotions, service levels and product availability against wage, energy and distribution costs. Cost reductions may support margins, but excessive reductions can also damage the customer proposition if they weaken availability or shopping experience.

Sainsbury’s attributes its profitability improvement to stronger grocery volumes and continuing cost savings, suggesting that it has not relied entirely on charging more per item. However, the financial release does not establish that all cost pressures have disappeared or that gains will continue at the same pace.

The company reports non-lease net debt of £75m, compared with £81m in the comparative period. Net debt including leases is considerably larger, at £5.634bn, reflecting the long-term obligations associated with a national retail property footprint. Investors therefore need to consider both measures rather than treating one as a complete picture of financial leverage.

The company’s commercial priorities extend beyond reducing costs. Maintaining availability through large distribution networks requires investment in forecasting, logistics and relationships with food suppliers. Price and promotional decisions can protect market share but may reduce gross margin if supplier costs are not controlled. Growing volumes while preserving service levels suggests the retailer is balancing these pressures, although a half-year set of accounts cannot show how consumer confidence or inflation will develop through the remainder of the financial year. Management’s outlook is therefore a useful guide, not a certainty.

Future results will provide a cleaner basis for comparing the continuing supermarket business once the accounting effect of discontinued operations is less pronounced. For now, improved underlying profitability and a statutory loss describe different aspects of the same half-year. Maintaining that balance will require disciplined, careful management of fresh food wastage and distribution costs across its nationwide estate.