J Sainsbury PLC's (LSE:SBRY) recent trading update suggests the supermarket is maintaining good momentum as it heads into the year. UBS points to three reasons for confidence in the first quarter: strong grocery sales growth, resilience in customer satisfaction and pricing, and a stable competitive environment.
Data to mid-May shows grocery sales rising 4.7%, supported by favourable pricing compared with peers. UBS expects overall grocery growth of around 4%, unchanged from earlier forecasts.
The Argos division, which often sees sales peaks in summer and Christmas, is also performing better than expected, with merchandise sales growth forecast to hit 3.7%, up from 2%.
While competition from rivals like Asda remains, UBS does not expect a worsening price war anytime soon. Rising supplier costs and inflation are likely to temper aggressive discounting, keeping the playing field stable.
Sainsbury’s shares trade at about 13 times expected earnings for 2026, a discount to its long-term average, offering potential upside.
Although the company isn’t likely to raise profit forecasts until more of the year’s results are in, the update points to a solid start, backed by strong productivity gains and controlled wage growth.
Overall, UBS sees Sainsbury as navigating current challenges well, balancing margin pressures with operational efficiency and steady sales growth.
UBS says 'buy' up to 308p. The stock was flat at 288p.