The supermarket spent much of the first half of the year trading between £2.55 and £2.70, eventually climbing to a near 13 month high of £2.80 by the end of May. Since then, however, Sainsbury’s has really struggled, plunging over the summer to end up at an 8 month nadir of £2.30 as August came to a close.
The stock did seem to find some momentum in September and the first half of October, allowing it to tickle £2.50 once again, only to slide back to a current trading price of £2.36.
While it spent most of May on the up and up, the supermarket saw a pronounced decline at the start of the month, dropping 7.5% in the 48 hours following its full year report. That’s because Sainsbury’s posted an 8.2% fall in pre-tax profits to £503 million, a figure that overshadowed a 12.7% jump in group sales to £29.1 billion thanks to a robust performance from Argos.
And even that sales surge didn’t tell the full story, with like-for-likes down 0.6% (admittedly an improvement on the 0.9% decline seen the year previous). The killer was Mike Coupe’s comments, with the CEO warning on the impact of consumer confidence and the fall in real wages, while labelling the supermarket sector ‘one of the most challenging, if not the most challenging, in the world’.
The firm’s Q1 update then arrived in early July, coming hot on the heels of an ugly June to provide a bit of relief among all the retail gloom. Sainsbury’s like-for-likes (excluding petrol) grew by 2.3%, its best growth in 4 years; total sales, meanwhile, were up 2.7%, with an especially strong 7.2% jump in its clothing division.
In terms of Thursday’s interim results, investors will be hoping that the Q1 comparable sales recovery continued into the second quarter. Yet things have only become trickier since the start of July, with inflation on the rise and the continued erosion of real pay growth causing some troublesome retail figures to come out of September and October.
J Sainsbury (OTC:JSAIY) PLC has a consensus rating of ‘Hold’ with an average target price of £2.60.
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