Sainsbury's trading update: What the analysts say
Sainsbury's achieved “record” levels of market share for its general merchandise and clothing business
UK retailer Sainsbury's this morning (8 January) said it achieved "record" levels of market share for its general merchandise and clothing business over the Christmas period. With that, analysts offered an upbeat view.
Conlumino analyst Joseph Robinson
"Sainsburys’ continued outperformance of its big four rivals is indicative of a retailer benefitting from strong, focused investment, helping it to deliver a compelling proposition to shoppers at both ends of the spectrum. Nonetheless, 2014 will bring with it significant challenges for the retailer. Price rivalry among the big four will undoubtedly intensify further, as its rivals attempt to stem falling market share.
"Non-food remains an area of significant potential for the grocer, with Sainsbury’s being less developed here than its main rivals. In particular, Sainsbury’s is making strong strides in categories such as clothing and homewares. Ironically, as a latter entrant into non-food, Sainsbury’s has been less exposed to the squeeze on more discretionary areas than Tesco and Asda, enabling it to adopt a more focused approach to diversification."
Shore Capital analyst Clive Black
"We are pleased and relieved, it has to be said, to see Sainsbury continue to report positive like-for-like sales (ex-fuel, incl. VAT), albeit just so. This performance from Sainsbury is in line with our recently set out expectations for the third quarter and festive trade.
"We should praise the company for cranking out this performance, sustaining King’s track record of positive like-for-like sales, against what is clearly a challenging and competitive environment. The competitive heat in 2014 can be expected to go up a gear as the hard discounters in particular are given less of a ‘free-run’ by what we deem to have been collectively sleep-walking and somewhat complacent and promotional intoxicated superstore operators. Sainsbury’s shares may positively react to this update with a collective sigh of relief."
Bernstein analyst Bruno Monteyne
"Sainsbury has seen five years of continuous market share increases. These have been based on its distinct retail offer that resonates with consumers, its great store execution and its track record of being one of the early movers into fast growing segments (online and convenience). Sainsbury's remains well placed to take advantage of a rebound in the UK food retail market. There are three concerns that hold us back on Sainsbury's: the possibility of a price war, Sainsbury's high leverage (which puts pressure on dividend growth) and the return of new space investments not earning the cost of capital."
Cantor analyst Mike Dennis
"We believe that despite the slower industry sales growth going into December... the Sainsbury’s outcome will be seen as a relatively good performance.
"We believe Sainsbury's new value simplicity pricing strategy and a simplified category assortment plan has increased average selling prices year-on-year in the third quarter and may have helped contribute to a better than expected sales growth and we believe trading margin in the second half."
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