Jefferies predicts turning point for Sainsbury's after Q1 slowdown

Total retail sales excluding fuel increased by 2.6% year-on-year in the 16 weeks to 22 June, with like-for-like sales rising by 2.7%. That's down from the 4.8% LFL growth seen in the fourth quarter of the previous financial year and 7.4% growth in the third.

Grocery sales increased by a "market-beating" 4.8% during the quarter, but general merchandise and clothing sales dropped by 4.3% on last year while sales at Argos fell 6.2%.

"An exceptionally strong grocery performance at SBRY in Q1 was diluted by a more downbeat delivery in the general merchandise businesses, particularly Argos. This should represent the trough, which feels well understood by the market given the shares' recent underperformance," Jefferies said in a research note.

The stock was down 1.4% at 254.2p by 1146 BST, trimming earlier losses after initially dropping more than 5%, down 9.2% on the month.

"Sunnier weather in recent weeks should underpin sequential acceleration, with the chief drivers through the rest of the year an improving consumer environment and an easing comp," Jefferies said.