US investment bank downgrades Sainsbury to sell and slashes its price target by 14% amid mounting pressure on the Argos business.
Goldman Sachs has downgraded J Sainsbury PLC (LSE:SBRY) to 'sell' from buy and cut its price target to 335p from 390p, sending shares in the UK's second-largest supermarket group down 3%.
The bank warned of a more challenging outlook driven by weakening consumer spending and intensifying competition in non-food retail.
While Sainsbury's full-year results met Goldman's expectations, with grocery sales up 5.2% and a 3% retail margin, the bank said the path ahead looked materially harder.
Goldman's UK household consumption growth forecast has been cut to just 0.6% year-on-year, the weakest reading since 2009, excluding the pandemic, while April consumer confidence data from GfK showed rising intentions to save.
The bank forecasts broadly flat retail operating profit in the coming year, with grocery growth offset by a 2% decline in like-for-like sales at Argos, Sainsbury's general merchandise arm, against growth of 1% in the prior year.
Goldman also flagged the rapid emergence of Chinese marketplace Joybuy as a competitive threat, noting it had already accumulated 300,000 active users in March.
The bank cut its 2027 and 2028 operating profit forecasts by 4% and 6% respectively, with its new 335p target implying around 3% downside against a sector average upside of 14%.