Morningstar

Sainsbury’s: Momentum Continues With Volume Growth and Market Share Gains

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Securities In This Article
Sainsbury (J) PLC
(SBRY)

J Sainsbury SBRY reported a first-quarter fiscal 2024 trading update with like-for-like sales growth up 9.8%, excluding fuel sales. Grocery sales growth was 11%, clothing was negative 3.7%, and Argos was up 5.1%. Grocery performance continued to recover sequentially (up 7.4% in fourth-quarter 2023, up 5.6% in third-quarter 2023, and up 1.2% in second-quarter 2023), along with general merchandise sales aided by Argos. Argos’ sales growth held up well, up 5.1% versus 9.3%/4.5%/1.6% in the fourth/third/second quarters and down almost 21% in first-quarter fiscal 2022. Sainsbury’s price lock commitment covers over 2,000 everyday products, which we believe along with Aldi’s price match scheme on roughly 300 high-volume fresh food products, is central to enhancing the value perception gap with competitors. The grocer has also been investing aggressively (GBP 60 million) since March in targeted price cuts (versus price increases for the market, according to Sainsbury’s) across more than 120 essentials like bread, milk, and pasta. We believe Sainsbury’s current strategy and execution, along with its already strong online capabilities, place the grocer in a strong position in an increasingly competitive U.K. grocery market. The grocer is already reporting a return to positive volume growth and market share gains across the grocery business and general merchandise market with Argos. Guidance for underlying profit before tax of GBP 640 million-GBP 700 million versus GBP 683 million in our model in fiscal 2024 remains unchanged. We don’t expect to change our GBX 278 fair value estimate and no-moat rating. The shares appear fairly valued.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Ioannis Pontikis, CFA

Director of Equity Research in Europe
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Ioannis Pontikis, CFA, is a Director of Equity Research in Europe for Morningstar*. He covers European grocers and global food and beverage companies like Tesco, Unilever, Nestle, and Danone, and manages a team of eight analysts across the Financials and Consumer sectors. He also leads Morningstar’s Equity Research Valuation Committee, advancing the firm's valuation methodology through projects such as developing new methodologies, refining our valuation model, and enhancing the efficacy of our ratings.

Before joining Morningstar in 2017, Pontikis spent six years on the buy-side, co-managing a $100M long/short equity fund and leading teams in applying machine learning to stock and equity factor selection models. He developed the fund's valuation and risk assessment framework, achieving strong risk-adjusted performance. Prior to this, Pontikis worked at Nestle S.A. in Athens, focusing on financial reporting, budgeting, and auditing proposals to improve processes.

Pontikis research has appeared in numerous media outlets including Bloomberg, CNBC, Reuters, Guardian, Frankfurter Allgemeine Zeitung among others.

Pontikis holds a bachelor’s degree in business administration from the University of Piraeus’s and a master’s degree in accounting and finance from the London School of Economics. He also holds the Chartered Financial Analyst® designation and studying towards an advanced post-masters degree in portfolio and risk management.

* Morningstar Holland BV (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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