Sainsbury’s sees sales surge as lockdown fuels growth

Impressive online sales have seen the group perform well, although the sector could still face challenges going forward

Article updated: 1 July 2020 11:00am Author: Joe Healey

  • Sainsbury reported robust growth for Q1 this morning posting like for like total retail sales growth of 8.2% boosted by strong growth in E-commerce and in the grocery (11%) / merchandise (7.2%) segments
  • Online sales more than doubled through the quarter showcasing a similar theme as that of Tesco who also reported a doubling of online sales last week. Argos also performed well online despite all stores being shut growing 10.7%
  • Sainsbury expect costs of roughly £500m as a result of the pandemic but this should be broadly offset by the business rate relief and strong contribution of sales Q1
  • Recommendation: With operating costs likely to remain inflated and a high degree of competitiveness in the industry, we view the stock as a ‘Hold’ for investors willing to accept a medium level of risk

Sainsbury reported robust growth for Q1 this morning, posting like for like total retail sales growth of 8.2% boosted by strong growth in E-commerce, and in the grocery (11%) and merchandise (7.2%) segments. Online sales more than doubled through the quarter, showcasing a similar theme as that of Tesco who also reported a doubling of online sales last week. Argos also performed well online despite all stores being shut, growing 10.7%. Sainsbury outlined that they expect costs of roughly £500m as a result of the pandemic but that this should be broadly offset by the business rate relief and strong contribution of sales in the first quarter.

This is a strong update from Sainsbury who have posted better than market growth grocery growth as they continue to invest in lower prices alongside improving their stores. The group have also showcased their flexibility to manage the increase in capacity from the pandemic effectively. Nearly 50% of new online groceries are from new customers, with the supermarket now taking over 650,000 orders a week compared to just 370,000 pre-crisis. The flexibility to double capacity speaks volumes of the technology and digital platforms Sainsbury operate and will be something investors will be very pleased with moving into the future.

However, it is important for investors to remember these results were always going to be higher thanks to the combination of consumers purchasing bigger baskets and good weather. Whether this theme will continue is unlikely. It is prudent to see that management are not expecting this sales growth to continue considering the uncertainty we still have surrounding consumer spending and something which investors should bear in mind.
With operating costs likely to remain inflated and a high degree of competitiveness in the industry driving down prices, the environment remains challenging. We view the stock as a ‘HOLD’ for investors willing to accept a medium level of risk.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Joe Healey

Investment Research Analyst

Following his completion of the graduate scheme, Joe is an Investment Research Analyst covering equities. He holds a BA Hons Business Management degree and is currently studying towards CFA Level II after passing CFA Level I in June 2019.

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