Join our community of smart investors

Sainsbury's running hard to stand still

The aggressive price war is visible from the grocer's latest update but its Home Retail acquisition is looking like a shrewd purchase
September 28, 2016

The deflationary battle has left a war wound on grocer J Sainsbury (SBRY) this morning after it reported a 1.1 per cent drop in like-for-like sales excluding fuel in spite of both like-for-like transaction and volume growth.

IC TIP: Buy at 243p

Chief executive Mike Coupe said this showed "customers are consistently choosing Sainsbury's for the choice, quality, value and customer service we offer" but the price was is having an impact on the numbers.

There are signs its recent acquisition of Argos-owner Home Retail will help matters. A total of 200 new digital collection points are due to open by the end of the financial year. The company already has 15 Argos digital stores open in Sainsbury's stores with the aim of having 30 by Christmas. This will mean customers will be able to collect Tu clothing, Argos products, eBay purchases and DPD parcels in one place.

In its second quarter to 27 August, Argos achieved total sales growth of 3 per cent and like-for-like sales growth of 2.3 per cent.

Mr Coupe also suggested there would be no let up in terms of the tough operating environment and the effect of the devaluation of sterling "remains unclear". He added that the group's strategy would allow it to "continue to outperform our major peers".