Sainsbury’s share price surges as Credit Suisse turns bullish on grocer

on Apr 7, 2016
Updated: Oct 21, 2019

Shares in J Sainsbury (LON:SBRY) have jumped more than two percent in London this morning after analysts at Credit Suisse tuned bullish on the blue chip grocer, arguing that its tie-up deal with Home Retail Group would bolster the supermarket’s profits. The comments are a boost for Sainsbury’s, which expects the deal to deliver no less than £160 million in synergies in the third full year after completion.

As of 10:09 BST, Sainsbury’s share price had spiked 2.51 percent to 286.71p, outperforming the blue-chip FTSE 100 index which currently stands 0.19 percent higher at 6,173.62 points. The shares have added 6.38 percent over the past year, and are up just under 12 percent in the year-to-date.
Credit Suisse hiked its stance on Sainsbury’s from ‘underperform’ to ‘outperform’ today, and raised its price target on the stock from 240p to 290p. The analysts argue that the grocer’s acquisition of Home Retail should boost profits, provide opportunities to grow sales, reduce costs, expand the grocer’s customer base as well as improve logistics.

“While the transaction will consume a significant amount of management time, we believe it will be time well spent,” the bank was quoted as saying, adding that “executed successfully, the transaction should allow Sainsbury to maintain the relevance of its store estate – its biggest asset – for longer”.
Credit Suisse’s comments come after the latest Kantar Worldpanel data showed earlier this week that sales at the blue-chip grocer had inched 1.2 percent in the 12 weeks ending March 27, with the company posting the best result among the UK’s ‘Big Four’ supermarkets.
In a separate development, the Guardian reported today that Sainsbury’s was ditching its Brand Match promotion later this month as it prepares to cut more prices on everyday products. The blue-chip grocer is reportedly planning to end the scheme, which it introduced in 2011, because changing shopping habits mean it now applies to less than a fifth of transactions.
As of 10:39 BST, Thursday, 07 April, J Sainsbury plc share price is 286.90p.