UK retailer Sainsbury's posted a 1.1% increase in like-for-like sales in the 15 weeks to 6 January, with chief executive Mike Coupe praising the "excellent operational performance across the group", even in its general-merchandise and clothing businesses.
Here's how the analysts saw it.
Fiona Cincotta, www.cityindex.co.uk
"Christmas 2017 is proving to be a strong one for British grocers, with Sainsbury's notching a solid rise in like-for-like sales. While the 1.1% increase isn't as strong as the 2.8% posted by Morrisons yesterday, it's a welcome improvement on the 0.6% growth recorded in the second quarter, and higher than what many analysts were anticipating.
"General merchandise remains the wild card, and sales there are still slipping at a concerning rate, as Argos goes toe to toe with Amazon, but a healthy rise in grocery sales has more than taken up the slack. Crucially, Sainsbury's is executing its merger with Argos extremely well, allowing it to surprise the market with a profit upgrade."
Catherine Shuttleworth, Savvy
“A solid performance from Sainsbury’s this morning – the stores looked good this Christmas, and 20% of business was online over the festive period (with an order a second on the 22nd of December) – showing just how important flex in the operating model for supermarkets now is. With a good store mix and offer, Sainsbury’s have some resilience in a tough marketplace and are well placed for the year ahead.”
Clive Black, Shore Capital
"Sainsbury's post-Christmas 2017 update reveals a group where sales growth is sound, operations seemingly good, and where FY2018 PTP is ‘expected to be moderately ahead of published consensus’. Following this update, we retain our above-consensus earnings and dividend expectations for the group, looking for CPTP of £585m, EPS of 18.6p. Trading on a 2018F PER of 13.5x and an EV/EBITDA multiple of 5.7x with a 4.1% dividend yield, reiterate our BUY stance on the group’s shares and our OVERWEIGHT position on the UK food retailers, noting Morrisons’ very pleasing ten-week update yesterday."
Barclays European Food Retail Equity Research
"Sainsbury says it expects to 'moderately' beat consensus of £559m (Barclays £565m) – this can be interpreted as c5% higher, i.e. mid £580m’s, however, Sainsbury also says it now expects Argos EBIT synergies this year of £72-77m versus previous guidance of £58m (i.e. £14-19m higher). At its 1H results in November, Sainsbury endorsed the then consensus of c£572m, so the improved PBT outlook is essentially through bringing forward synergies (of which the ultimate total has not changed), rather than the company’s own underlying expectations having changed materially."
Bruno Monteyne, Bernstein Research
"General merchandise and clothing [are] dragging down growth, potentially due to temporary factors. Clothing growth slowed down 530bps, to +1.0%. This is likely due to a very bad start to the winter season (October was too warm), but could also have been impacted by weaker consumer confidence. Similarly, with general merchandise sales, remaining weak at -1.4% growth (20bps better than Q2): this can partially be explained by space changes (closing GM supermarket space when opening new Argos locations) or by consumer confidence. Time will soon tell whether this is the start of consumers tightening belts or temporary factors. Sainsbury's report that they are gaining share in a tough environment."
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
