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

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

Sainsbury's has reported a 9.8% like-for-like sales increase in the first quarter of its financial year, with chief executive Simon Roberts noting that the British retailer is "putting all of [its] energy and focus into battling inflation".

Here's how leading industry analysts from GlobalData, Third Bridge, Wealth Club, Shore Capital, Bernstein, Admirals and AJ Bell viewed its performance.

Eleanor Simpson-Gould, GlobalData

“The first 16 weeks of FY2023/24 mark strong quarterly growth for Sainsbury’s, with like-for-like (l-f-l) sales increasing 9.8%, powered by a positive response to the retailer’s initiatives on price, effective event marketing and favourable weather towards the end of the period. Grocery was the standout category, accelerating from 7.4% in Q4 to 11.0%, albeit against a 2.4% decline in sales in in Q1 FY2022/23.

"Sainsbury’s latest results trump growth from market leader Tesco, who announced Q1 growth of 8.2% for the 13 weeks ending 27 May 2023. With inflation showing early signs of easing and the underlying profit outlook for the coming year remaining unchanged, Q1 may well mark the peak of grocery sales growth for Sainsbury’s in this financial year.

“As inflation eases in the latter half of 2023, Sainsbury’s will remain under scrutiny to pass on reductions in buying prices to customers amid investigations into supermarket profiteering, and retention of new customers will require continued ambition on pricing to sustain volume growth. However, enticing shoppers to trade up into higher price points will ease the inevitable decline in sales growth, Nectar Price promotions will be key to introduce wider ranges to shoppers’ baskets.


"Continuing investment in product innovation will also be important to encourage shoppers to trade up to premium ranges, with Sainsbury’s looking to build on the 300 new products ranges launched during Q1."

Orwa Mohamad, Third Bridge

“Our experts expect prices to come down as we come out of the summer into September. Supermarkets are facing accusations of profiteering from customers and are already exerting more pressure on suppliers.

"Sainsbury's reported like-for-like sales growth in line with industry trends. According to our experts, this growth is still being driven by high inflation and a high comparison to last year.

"Sainsbury's has joined the loyalty card wars in order to bolster its market share against discounters and other supermarkets. Our experts predict that the competition among loyalty card systems will only intensify, with many retailers following the example set by Tesco's Clubcard.


"Discounters will pose an even more lethal threat to Sainsbury's and other supermarkets if consumers run into a mortgage crisis. According to our experts, this summer will be a crucial time when the big four need to outperform the discounters leveraging their fresh food ranges and non-food items."

Charlie Huggins, Wealth Club

"This is a solid trading update from Sainsbury's with a return to volume growth and an improved market share performance, with bank holidays and warmer weather towards the end of the period providing a welcome boost.

"Sainsbury's has worked hard to lower prices in the face of intense competition. The launch of Nectar prices, where Nectar card holders save money on everyday items seems to have been well received and has helped the group to hold its own against Tesco and the German discounters.

"The group comments that food inflation is starting to fall and this should help ease pressure on consumers, whose finances have been squeezed from all angles by rising prices, no more so than for the weekly shop.


"That said, it is far too early for Sainsbury's to declare victory. The competitive environment continues to heat up with Aldi, Lidl and Amazon all looking to expand in UK grocery. Cost pressures remain intense, for both Sainsbury's and its customers, meaning profits will likely go nowhere this year. But for now, the group is holding its own."

Clive Black, Shore Capital

"Sainsbury has, under Simon Roberts' leadership, demonstrated good pace, focus and execution with beneficial financial outcomes in terms of market share, margin stability, and most importantly cash generation. Q1 FY24 continues a good streak of resolute absolute and relative performance in ever-changing and challenging macroeconomic UK times.

"We commend management for that but there is clearly more to do if earnings are to sequentially build, cash flows to mount, and so benefit to emerge for patient shareholders, noting that JS is a very good employer, is generally decent to its suppliers, and takes its wider social, environmental and community responsibilities seriously.

"We continue to contend that too many in the UK take the food they buy from a generally excellent end-to-end system for granted, and too few ask why and how those supermarkets keep investing, investment that is critical to support all stakeholders."


Russ Mould, AJ Bell

“If the overall value of a supermarket’s sales were not going up at a time of rampant food inflation something would be seriously wrong, but what’s more telling in the latest update from Sainsbury’s is news of an increase in volumes.

“Under Simon Roberts, who took over the business a little more than three years ago, there has been a renewed focus on its core food retail operation and this seems to be paying off. The market positioning of Sainsbury’s means it could be taking some business away from the more premium-priced Waitrose and Marks & Spencer, helping to compensate for any market share lost to the German discounters Aldi and Lidl.

“There will be wider relief at Roberts’ indication that food price inflation is starting to ease. The company’s general merchandise arm – in essence the Argos retail brand – is more exposed to economic uncertainty than the grocery division. After all, people need to eat, they don’t need to buy products like toys and electrical goods.

“Sainsbury’s is at least being proactive in this area, working on efficiencies in the background so it can attract customers with keener prices in the foreground.”

William Woods, Bernstein

"Sainsbury's reported Q1-23 performance this morning with group LFLs at +9.8%, beating consensus expectations of 7.2% by +258bps (but we caution the quality of quarterly consensus due to limited submissions).

"While this appears to be stronger than Tesco's Q1 LFL of +9% reported a few weeks ago, this is driven by comp effect as Sainsbury's comp is -2.5pts easier. Management maintained the FY23 guidance of £640-700m UPBT and retail FCF >£500m, which is not surprising given that this is only Q1."

Roberto Rivero, Admirals

"Whilst fuel sales have fallen, reflective of lower prices, total retail sales have grown year-on-year which is far from surprising. As high inflation pushes up input costs, Sainsbury’s needs to pass these higher costs on to consumers in order to preserve profit margins.

"Naturally, this has the effect of driving up revenue. But the real question is, how much have costs increased? And what impact has this had on margins? Sales may have increased but, depending on how much input costs have also increased, this won’t necessarily have translated into a rise in profit.

"UK supermarkets are a fairly low margin business and, last year, Sainsbury’s already low margins became even lower as soaring costs caused profit to fall. Until we see a normalisation in inflation, it is likely that supermarket margins will continue to come under pressure and it wouldn’t be at all surprising to see Sainsbury’s profits fall again in November when it releases its interim results."

© 2023 European Supermarket Magazine – your source for the latest Retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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