Stock of the day 16/03/2015 – J Sainsbury PLC

As the UK supermarket wars rage on, Sainsbury’s will be hoping to announce a victorious fourth quarter with its trading statement on Tuesday.

However, the landscape is still shifting with Aldi and Lidl continuing their push into the Big Four’s market share, with Morrisons last week announcing the closure of 23 UK stores amidst heavy losses in 2014.

After steady declines throughout the previous 12 months, Sainsbury’s opened 2015 at £2.46, and has seen tentative growth in the first few months of the New Year. Despite the worst Christmas sales in a decade the stock managed to ride out a wave of negativity following its Q3 trading statement, and by the end of January the stock was trading at £2.70. It remained near this level for much of February leading Sainsbury’s to reach £2.77 by the first week of March. Yet things have taken a turn for the worse in the past week, as the stock has slid from £2.75 on the 9th March to £2.56 by Monday morning.



This is an ominous fall ahead of the Q4 2014/15 trading statement, with disappointing murmurs about the supermarket’s recent performance hitting the stock’s price. In the past 12 weeks sales at Sainsbury’s have fallen 0.5% according to Kantar, with Barclays forecasting a ‘sales decline of 2.3%’, slightly higher than the 2.1% drop predicted by CEO Mike Coupe 3 months ago. This would be the supermarket’s 5th quarter of losses as the big beasts of the food world struggle to compete with the younger upstarts.

Sainsbury’s, like Tesco and Asda, is being squeezed from both sides: its ‘Taste the Difference’ range is struggling to draw in customers who would rather shop at high-end stores like Waitrose and Marks & Spencer, whilst its mid-range and ‘Basics’ products are slowly being eaten into by the German duo of Aldi and Lidl. It is these latter two retailers that pose the biggest threat to Sainsbury’s and the rest of the Big Four; as the supermarket giants flounder Aldi and Lidl continue to post around 14% like-for-like sales growth per quarter, sales that appear to be having a direct hit on the bigger stores.

The cheap price of oil has given the Big Four some much needed breathing room; however, they continue to scrabble, seemingly in vain, to push food prices to compete with the bargain German stores. Sainsbury’s managed to provide some (small) pleasant surprises in its third quarter statement; given its recent downward trend on the markets, it will need to pull a similar rabbit out of its earnings hat to stall its current losses.