James Gard: We last looked at our stock of the week Sainsbury exactly a year ago.
Supermarkets are in the line of fire amid accusations of they are profiteering from rising inflation and the government is talking tough. Naturally that means grocery retailers are now keen to tell us about price cuts as a way of keeping the state at bay. Sainsbury’s is one of them, slashing prices on essentials last week.
Along with mortgage costs, food inflation is one of the biggest concerns of Britons in summer 2023. Competition in the sector is pretty stiff: the discounters are targeting the less well off while Waitrose and M&S still caters for the affluent. That leaves Sainsbury’s in a sort of no-man’s-land between the haves and the have nots. Sainsbury’s has decided to take the battle to the likes of Aldi by price matching to it, as well as absorbing some of the recent price increases.
Owners of the stock have benefited from buoyant dynamics of the industry but is there an entry point for new buyers? April’s results gave a surprise upgrade to this year’s financial forecats, so profits are expected to be between £640 and £700 million. But this could still be lower than last year and the year before.
There’s also a dividend yield of around 5% but the most recent payout was fiat on the year before. Last year I mentioned a possible takeover bid for Sainsbury’s and that hasn’t yet materialised; it also seems less likely now the shares have risen 30% in year.
Morngstar analysts think the shares are now fairly valued after this recent rise. Still, things may be stirring in the sector - Ocado shares briefly came to life last week in talks of Amazon interest but that has fizzled out. For Morningstar, I’m James Gard.
