J Sainsbury PLC (LSE:SBRY) interim results should add to the growing evidence that the core grocery business can continue to outperform in a rational UK grocery market.
The recent weather has likely been unhelpful for Sainsbury's general merchandise business, but the effect will likely be less marked going forward and will reverse at some point, the broker believes.
“We expect the core Grocery business to remain in rude health, but the shine has been taken off by the unloved Argos business where sales are expected to have been hindered by unseasonal weather.
“Share performance year-to-date partly reflects a high starting point – expectations were high into the February investor day and Sainsbury entered the year looking more expensive than Tesco.
We expect key elements of guidance to be reiterated namely EBIT of £1,010-1,060m and free cashflow a of more than £500 million.
Sentiment might be mixed with GM [Argos] taking the shine off strong core grocery.
Shares up 1.4% to 268.6p.