Price cuts and store refurbishments are on the horizon, an attempt to combat falling market share.
Sainsbury’s (SBRY) tills ring less as sales fall
- First quarter sales worse than expected , hampered by poor clothing segment.
- Ongoing competition forcing the company to cut prices and refurbish stores.
- With shares currently trading at 20-year low, we have placed our hold recommendation under review.
Sainsbury’s has done little to reassure the market of material progression made in the wake of the failed Asda merger. Sales in the first quarter, excluding fuel, were worse than expected - dropping by 1.6%. Notably, the weakness was mainly in the non-food categories such as clothing, where sales dropped 4.5%, compared to a 0.5% in groceries. In the face of ongoing competition from the discounters Aldi and Lidl, the company is cutting some of its prices and refurbishing 400 stores, however recent data showed a drop in market share.
These were slightly disappointing figures from Sainsbury’s, although trading conditions were a little more favourable last year. The shares dropped back initially before recovering, but they’ve had a torrid time over the past year, currently trading near a 20-year low.
Our View on Sainsbury - Hold
This is a clear reflection of how concerned investors now are and therefore we have placed our hold recommendation under review. We could not argue with investors who decide to jump ship.
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