Sainsbury's First-Half Results – What The Analysts Said

By Steve Wynne-Jones
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Sainsbury's First-Half Results – What The Analysts Said

UK retailer Sainsbury's has posted a marginal decline in group sales in the first half of its financial year, with like-for-like sales down 1.0% and underlying profit before tax down 15% for the period.

Commenting on its performance, Sainsbury's chief executive Mike Coupe said, “We have created positive momentum across the business through strategic investments in our customer offer. We have lowered prices on every day food and groceries, launched a range of value brands and are more competitive on price than we have ever been."

Here's how leading retail analysts saw it:

Richard Lim, Retail Economics

“The sharp fall in profits may well reflect the phasing of cost savings, but blaming the weather and higher marketing expenses suggests there is significant pressure on profit margins bubbling under the surface. There's no getting away from the fact that sales fell across all parts of the business reflecting tough market conditions.

"However, the integration of Argos appears to be progressing well. It offers a truly attractive proposition for customers who increasingly bounce across physical and digital channels, often at the same time.


"Despite the failed Asda takeover attempt, the store network still offers widespread UK coverage to support convenient online collections while continued investment in speedier deliveries puts them well ahead of most retailers."

Steve Miley,

"Whilst Sainsbury blamed the slump in profits on a variety of factors including phasing of cost savings, higher marketing costs and tough weather comparatives investors might be thinking that Sainsbury took its eye off the ball when fighting for a £12 billion merger with Asda.

"The figures underline the struggle that Sainsbury is facing as it looks to grow revenue and rebuild confidence in its strategy following its failed merger with Asda.

"Even as competition remains fierce in the sector investors are feeling confident that Sainsbury is back focused on the game and well positioned as it heads into the all-important festive period. Shares have jumped over 1% on the open."


Thomas Brereton, GlobalData

‘‘Taking a quick glance at Sainsbury’s half-year results, it is understandable why its tumbling profits will hog the headlines. As well as a £41m decline in underlying profit (blamed upon the combined impact of phased cost savings, higher marketing costs and tough weather comparatives), statutory pre-tax profit all but disappeared (falling from £107m to £9m) due to recent review of the value of its store estate.

"And as for its retail performance, like-for-like sales ex. fuel fell -1.0%, distinctly shy of rival Tesco’s -0.3% drop over a similar period (with both supermarkets ailed by the ongoing price war in the grocery sector).

But a deeper dive shows why Sainsbury’s is now feeling optimistic that it can turn itself around following the disarray experienced after the collapse of its planned merger with ASDA; taking the results at a quarterly level, Q2 shows a good improvement on Q1.

"While this comparison is slightly distorted (with Sainsbury’s showing growth yet underperforming a weather-buoyed market in Q2 2018), it signals that Sainsbury’s is a retailer now finding its feet after underperforming for the previous 18 months."


Barclays European Food Retail Equity Research

"Given that Thursday's 1H results were literally only six weeks after the company's quite comprehensive September CMD, it is perhaps no great surprise that the main messages and guidance elements were all restated. Given a less impressive set of market share data in October, it was also reassuring to hear that the company is confident that it has 'maintained its relative volume performance since the CMD.

"Fundamentally we think that the company continues to offer a very attractive FCF yield (at least 10% per annum, based on its net debt reduction guidance) and that upcoming quarterly LFL comps are not especially challenging. We reiterate our Overweight stock rating and price target of 250p."

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Dayeeta Das. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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