Sainsbury’s (SBRY) has hailed a “good” Christmas performance as sales in the 15 weeks to 7 January rose 0.8%, with like-for-like sales nudging up 0.1%. CEO Mike Coupe said the supermarket had a record Christmas week, bringing in more than £1bn across the group. Here’s how leading City and retail analysts have reacted to the results.
Analysts at Bernstein said Sainsbury’s results were “well ahead of consensus” and delivered the first positive like for like sales since 2013. “ LFL volumes are now flat (having previously been in decline), implying a small inflation at Sainsbury’s retail. Importantly this was achieved with LFL transaction growth across all channels.” They added: “This is a very solid trade update. At first glance it may seem below Morrisons (and probably Tesco tomorrow). Two explain this: (1) Sainsbury’s Q3 is a 15 week quarter (containing Christmas) rather than a shorter Christmas period as reported by Morrisons (9 weeks) and Tesco (6 weeks). Therefore the Christmas bumper sales has less of an impact. (2) Sainsbury’s has performed the best of the big-4 over a longer 2 or 3 year period so they don’t have the benefit of easy comparatives.”
Analysts at Jeffries said the results were ahead of expectations but “we remain of the view that challenges will be on the increase for both sides of the group, given a combination of sourcing pressures and a more challenged consumer.” Like for likes had clearly improved, they added, with “market data [suggesting] that more limited loss of customers to Tesco may have helped in the closing stages of 2016”. They also noted that Argos had delivered for JS in the key Christmas period but warned “we remain of the view that overall demand levels will weaken from here, and the effectiveness of Fast Track as an incremental market share driver may reduce.” Further “headwinds” coming in 2017 could also prove a risk. “Grocery gross margin may well prove the greatest pressure point in 2017.”
John Ibbotson of Retail Vision said Sainsbury’s had turned in “a surprisingly decent Christmas performance”. “After a mostly miserable 2016, the struggling brand’s sighs of relief are audible. But talk of a turnaround is a touch premature. Like-for-like sales barely crept up and like-for-like volumes haven’t budged. So far, it’s a case of Sainsbury’s steadying the ship rather than plain sailing.” Ibbotson added the integration of Argos had proved a distraction but it had performed well against Tesco n the Christmas toy wars and waskey to Sainsbury’s long-term multi-channel success. “Sainsbury’s is playing a slightly longer game than some of its competitors but future-proofing itself in this way could pay dividends down the line. It is by no means out of the woods yet, but having a plan that’s different to its competitors and sticking to it can count for a lot in the current environment.”
Phil Dorrell at Retail Remedy said “not as bad as it could have been” was not a strong position for Sainsbury’s to be in. “Sainsbury’s may now be regretting their decision to virtually eliminate multibuy promotions, proving too aggressive on the sales line at this high-volume and highly competitive time of year. While David Potts this week celebrates finding Morrisons’ mojo, Mike Coupe is left wondering if Sainsbury’s mojo was left behind with the promotional calendar.” He added the market had been looking for signs the Argos acquisition was a sound move, “and a strong Christmas period suggests it is”. Dorrell said: “It is too soon to say whether it delivers within a Sainsburys supermarket but that’s not to say it was the wrong decision. We believe it is strategically aligned with the need to drive non-food and fill space in Sainsbury’s large format stores.”
David Stoddard, analyst at Edison Investment Research, said: ”Sainsbury highlights the competitive environment and uncertainty over sterling’s devaluation but remains focused on delivering it’s strategy. Valuing such uncertain prospects is not aided by the absence of an update on current year guidance.”
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