Sainsbury’s share price: Analysts see job cuts as the right move

Shore Capital remains bullish on blue-chip grocer

Sainsbury’s share price: Analysts see job cuts as the right move

J Sainsbury’s (LON:SBRY) plan to cut up to 2,000 jobs is the right move for Britain’s second-biggest supermarket, Shore Capital has said. The comments came as the broker reiterated its bullish stance on the blue-chip grocer.

Sainsbury’s share price lost ground in yesterday’s session, closing 0.57 percent lower at 246.30p, and underperforming the broader UK market, with the benchmark FTSE 100 index adding 26.70 points to close 0.36 percent higher at 7,542.87. The group’s shares have added nearly six percent to their value over the past year, as compared with an over seven-percent gain in the Footsie.

ShoreCap remains bullish

Shore Capital reiterated its ‘buy’ recommendation on Sainsbury’s yesterday, following news that the supermarket was set to cut up to 2,000 UK jobs, with the measures expected to mainly affect human resources and payroll staff. 

Citywire quoted the broker’s analyst Clive Black as commenting that from an “investment thesis perspective” he was comfortable with Sainsbury’s performance in groceries, which is benefiting from increasing inflation and that Argos synergies were ‘a key positive force’.

“As ever, for the respective folks concerned by the announcement, Sainsbury’s decision will be very worrying and disappointing,” he pointed out, adding, however, that like many large companies, Sainsbury’s was ‘bloated’.

“As such, we can understand in the big scheme of things why this is a correct course of action and so welcome to the stock market,” Black said.

Other analysts on Sainsbury’s

Deutsche Bank meanwhile reiterated its ‘hold’ rating on the blue-chip grocer, without specifying a valuation on the shares. According to MarketBeat, Britain’s second-biggest supermarket currently has a consensus ‘hold’ rating and an average price target of 260.29p. Sainsbury’s is scheduled to update investors on its interim performance on November 9. 

As of 08:00 BST, Thursday, 19 October, J Sainsbury plc share price is 245.80p.

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