Analysts at UBS argue that the acquisition of Argos has made J Sainsbury (LON:SBRY) more seasonal and cyclical, and could hurt its Christmas trading figures, Citywire has reported. The comments come ahead of the supermarket’s update a week from today.
Sainsbury’s share price was little changed in the previous session, shedding 0.08 percent to close at 241.20p. The shares marginally outperformed the broader UK market, with the benchmark FTSE 100 index closing 0.52 percent lower at 7,648.10 points. The grocer’s shares have lost more than three percent of their value over the past year, as compared with a more than seven-percent gain in the Footsie.
UBS flags Argos concerns
UBS reaffirmed its ‘buy’ rating on Sainsbury’s yesterday, with a price target of 325p on the shares, arguing that a rebound in the grocer’s sales following a weak second quarter would probably be enough to offset a possible dip from Argos after its strong performance a year ago.
“Argos is a seasonal business, with Black Friday to Christmas being its most important trading period,” the broker’s analyst Daniel Ekstein commented, as quoted by Citywire. “It is cycling a tough comparative period […] the market is tough, with consumer discretionary income stagnant.”
By contrast, the blue-chip grocer entered the Christmas period with ‘erratic sales momentum’ after a weak November followed a strong October.
Other analysts on Sainsbury’s
Deutsche Bank, which sees Sainsbury’s as a hold, lowered its price target on the shares from 300p to 260p yesterday. According to MarketBeat, the blue-chip grocer currently has a consensus ‘hold’ rating and an average price target of 261.86p.
Sainsbury’s will post its Christmas update next Wednesday, to be followed by FTSE 100 rival Tesco (LON:TSCO) on Thursday.