Deutsche Bank has described J Sainsbury PLC (LSE:SBRY) third quarter update as positive overall, supported by strong performance in grocery and an upgrade to full-year free cash flow guidance.
Fresh food sales rose by 8%, ahead of Tesco’s 6.6% growth, while sales in Sainsbury’s premium “Taste the Difference” range increased by 15%, also ahead of Tesco’s “Finest” range at 13%.
General Merchandise and Argos saw sales decline, which the broker attributed to a tough market for discretionary spending during the Christmas period. However, Argos gained market share in Homewares, Electricals and Toys. Clothing volumes also outperformed.
Free cash flow guidance was raised to “£550 million-plus” from “£500 million-plus”, compared to consensus of £549 million.
Operating profit guidance remains at “£1 billion-plus” versus consensus of £1.06 billion. Deutsche Bank noted that the upper end of consensus may fall slightly.
The broker said it was encouraged by the strong momentum in grocery following weaker-than-expected sales at Tesco.