Wednesday preview: Sainsbury's reports first quarter trading update

J Sainsbury will on Wednesday post its trading update for the 12 weeks to 4 June.

The supermarket is expected to report a drop in first quarter like-for-like sales due to its shift away from multi-pack promotions to simpler price cuts.

Kantar Worldpanel last week said the supermarket’s sales in the 12 weeks to 22 May were down 1.2% while its market share shrank to 16.2% from 16.5%.

Following the report, Deutsche Bank said it lowers its estimates on first quarter like-for-like sales to a 1.4% fall from a previous forecast for a 0.4% decline after already cutting its projections last month from a 0.6% increase.

Deutsche Bank cut its target price to 310p from 325p but reiterated a ‘buy’ rating on the stock.

“We expect a +1% contribution from new space to drive total sales growth excluding fuel of -0.4%,” according to Deutsche Bank analyst Niamh Mcsherry.

“While this Kantar data is disappointing, we still see the opportunity for Sainsbury’s to invest more in the offer in order to recover top line momentum.”

The UK’s so-called Big Four supermarkets, including Sainsbury, Tesco, Asda and Morrisons, have been engaged in a price war amid fierce competition from discounters Aldi and Lidl.

Last month Sainsbury chief executive Mike Coupe said: “We’ve seen food prices fall by almost 4% in the past couple of years. Great for customers. Not necessarily great if you’re selling groceries.”

Coupe warned that the grocery market would remain competitive for the foreseeable future.

Meanwhile, investors will be looking to Wednesday’s trading update for any update on Sainsbury’s acquisition of Argos owner Home Retail Group. The deal is expected to be completed in the third quarter pending regulatory approval.

However, the UK competition watchdog said last month that it was looking into whether the proposed take-over could result in a “substantial lessening of competition” for consumers.

The Competition and Markets Authority is expected to announce on if it intends on launching a full investigation on 25 July.

Wednesday 08 June

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