- The grocer's March year-end figures are due out on 28 April
- Speculation has re-emerged over a possible M&A approach
Buy the rumour; sell the fact. Earlier this year, hedge funds increased their exposure to J Sainsbury (SBRY) as speculation mounted that it would be the next high-street grocer subject to an M&A approach, following on from the Issa brothers’ successful tilt at Asda.
The rumour mill was hard at it again last week, when news emerged that VESA Equity Investment, a vehicle controlled by Czech businessman Daniel Kretinsky, had raised its stake in the supermarket to 9.99 per cent.
The shares appear to have come courtesy of the Qatar Investment Authority, a long-term investor, which saw its stake reduce from 22 per cent to 15 per cent. VESA maintained that the move was in line with its “interest in acquiring strategic minority participations in publicly listed companies across the wider food retail distribution segment”, but it is worth noting that Kretinsky failed to take a controlling stake in German retailer Metro AG (ETR: B4B) through a bid process in 2019.
Kretinsky will be paying close attention to the group’s full-year figures due out on 28 April. After forgoing business rates relief of £410m, the group is guiding for underlying profits of at least £330m for the March year-end. However, as we crawl out of lockdown, industry analysts will also be weighing up whether the temporary effects through Covid-19 disruption will have any longlasting impact on the grocery business.
Tesco’s (TSCO) recent year-end update provided few clues on that score, save for some predictable comments regarding online traffic. Yet there is every chance that Sainsbury, along with the remaining UK grocers, will soon be engaged in trench warfare with their German rivals once price points, rather than simple product access, start to re-emerge as the primary determinant for consumers. (The latest report from Which? found Lidl to be the cheapest supermarket in March, ahead of fellow discounter Aldi). The steady gains in market share by the discounters underscore a brutal logic in the grocery market, pandemic effects notwithstanding.
