In the ailing UK supermarket industry, meeting estimates is the new beat.
Sainsbury's shares rose as much as 5.5 per cent Wednesday (10 May), the most in five months, after the grocer did no more than match analysts’ sales predictions.
Investors already expect bad news from the food retailers, which have been losing market share to discounters for years. Sainsbury's and Morrisons are the two most shorted members of the UK benchmark FTSE 100 Index, according to researcher Markit, using a term for when investors sell borrowed stock to buy it back later for less. News that isn’t so bad may give them reason to start covering those positions.
“The shorts are probably running a bit scared,” said Nick Bubb, an independent retail analyst, citing comments made by executives on a conference call Wednesday about how the mainstream supermarkets are closing the price gap with discounters and seeing volume growth return.
Sainsbury's shares were up 4.4 per cent at 259.9 pence as of 11:12 am in London, the second-biggest gain in Britain’s benchmark FTSE 100 Index. Market leader Tesco rose 3.8 per cent and smaller competitor Morrison advanced 3.5 per cent.
Sainsbury said earlier that revenue at stores open at least a year fell 2.1 per cent, excluding fuel, in the 12 weeks ended 6 June, broadly meeting analysts’ estimates. That’s the sixth consecutive quarterly decline in same-store sales.
“In the context of horrific market conditions, these aren’t a bad set of numbers,” Bryan Roberts, an analyst with researcher Kantar Retail, said by phone.
Competitors have reported steeper declines in their most recent quarters. Morrison’s same-store sales fell 2.9 percent, while Wal-Mart’s Asda posted a drop of 3.9 per cent.
Following a decision last year to cut prices on 1,100 products, transaction volumes increased for a second straight quarter, with growth of 1.5 per cent to two per cent, the company said. That was “slightly ahead of where we expected,” Chief Executive Officer Mike Coupe said on a conference call.
“On a volume basis, Sainsbury have been able to defend their market share,” said Bruno Monteyne, an analyst at Sanford C. Bernstein. “They’re outperforming the competition.”
News by Bloomberg, edited by ESM
