Meaningful analysis of J Sainsbury plc (LON:SBRY) has been at a premium following the trading update.
As foreshadowed by a number of analysts, sales went into reverse after the grocer cracked down on ‘multi-buy’ special offers such as meal deals.
Profit margins should be protected with fewer giveaways on offer – or at least that‘s the theory.
Investors seemed to take fright after Sainsbury said like-for-like sales fell 1.1% in the 16 weeks to September 24. The stock lost 4% to change hands for 241p.
“With a clearly competitive landscape and persistent deflation, albeit this may be easing, trading is tough, and…it is set to remain so,” said Clive Black, analyst at Shore Capital.
City broker Jefferies referred to the update as a “mixed bag”, saying the core supermarket operation had under-performed while the newly-acquired Argos business had been more resilient than expected.
It rates Sainsbury shares ‘hold’ with a 250p price target.
Shore’s veteran retail analyst Black, meanwhile, put his recommendation and forecasts under review following the trading statement.
“Intuitively, we can envisage a scenario where we downgrade our core chain expectations but bolster or upgrade medium-term group earnings forecasts, to factor in the benefits from the Argos acquisition,” he said.
This non-committal attitude is echoed throughout the analyst community.
Of the ten polled by the Broker Forecasts site, half have ‘neutral’ recommendations, three are ‘buyers’ and two have outright ‘sells’ on the stock.