J Sainsbury PLC (LSE:SBRY) fell foul of the same heightened expectations that scuppered Tesco PLC (LSE:TSCO) on Thursday in the wake of its solid festive trading update.
Sainsbury delivered a robust set of numbers on Friday, confirming it was a big grocery winner over Christmas.
But the absence of a fresh upgrade to profit guidance, despite a strong trading update, left investors underwhelmed. Shares fell 5% to 312p in early trading.
The supermarket group, which had already raised its full-year guidance in November, reiterated its forecast for over £1 billion in retail underlying profit.
That may be prudent, but some in the market were clearly betting on more, particularly after Sainsbury posted 5.4% growth in grocery sales in the third quarter, well ahead of an industry grappling with falling volumes.
As Clive Black of Shore Capital notes, Sainsbury stood out by building units in baskets during a "volume-light" festive period, a clear sign it’s pulling shoppers from rivals.
The retailer gained share for the sixth Christmas in a row, helped by initiatives like Aldi Price Match and a well-received Taste the Difference range.
Non-food was the drag. Sales at Argos dipped 1%, despite a rise in units sold, while general merchandise and clothing within Sainsbury’s slipped too.
For all the momentum in food, the wider business needs to improve before the market fully re-rates the shares.
Still, cash generation impressed. Free cash flow is now expected to exceed £550 million, up from £500 million previously. With more than £800 million set to be returned to shareholders this year, Sainsbury is striking a balance between investment and reward.