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Sainsbury shares have already bid farewell to early gains of 2% to trade flat as reality sinks in and investors focus on a 6-week share price downtrend and potential for a retrace to the 18-month channel floor around 230p via a bearish flag pattern.
This after the grocer reported a Q1 same-store sales ex-fuel decline (-0.8%) which, although weak and a backtrack from Q4 (0.1%; back to growth for first time in 2 years), wasn’t as bad as consensus had pencilled in (-1.4%). Food price deflation and pricing pressure mean market conditions remain challenging which is not exactly news but not what investors want to hear in terms of outlook, even if total sales managed to eke out gains of 0.3% via growth across all channels.
With sector competition still fierce as ever, plans for a simpler pricing strategy in response to consumer feedback is a positive step, as is completion of the Argos deal later in the year and encouraging performance from the bank. The CEO may see SBRY continuing to outperform rivals but shareholders refuse to ignore the sector reality that lower prices and rather aggressive competition is benefiting customers more than them.
Mike van Dulken, Head of Research, 8 Jun
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
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