Sainsbury's a 'buy' after third quarter beat, says Societe Generale

Sainsbury’s third quarter highlights the group’s compelling strategy and differentiation from the other 'Big Four' supermarkets, Societe Generale said on Wednesday.

The company’s like-for-like (LFL) retail sales were down 0.4% over the festive third quarter but by less than the 0.7% forecast, leading the grocer to say that the second half as a whole is likely to be better than the first.

The supermarket, which is continuing to mull a bid for Home Retail after a November offer was rejected, lifted total retail sales 0.8% excluding fuel, as its new simpler pricing strategy of lower regular prices and reduced levels of vouchering and promotional participation helped grow transactions and volumes.

“The group benefitted from a more transparent pricing policy, with fewer promotions/multi-buys and a stronger focus on ‘low’,” said Societe Generale analyst Arnaud Joly.

Societe Generale gave Sainsbury’s a ‘buy’ rating and a target price of 315p.

Shares fell 0.34% to 250.35p at 1226 GMT.