Sainsbury’s share price: Analysts weigh in on Q1 results

Hargreaves Lansdown reckons that the real challenges for J Sainsbury (LON:SBRY) are coming from the industry, Citywire reports. The comments came as the blue-chip grocer updated investors on its first-quarter performance yesterday, posting a fall in sales and cautioning that retail markets remained “highly competitive and promotional and the consumer outlook continues to be uncertain”.

Sainsbury’s share price fell in the previous session, giving up 0.53 percent to close at 198.45p. The stock underperformed the broader UK market, with the benchmark FTSE 100 index extending its rally and adding 0.66 percent to 7,609.32 points. This morning, the grocer’s shares have gained ground, having climbed 1.59 percent to 201.60p as of 08:18 BST, as compared with a flat Footsie.

Sainsbury’s faces industry challenges

Citywire quoted Hargreaves Lansdown analyst Sophie Lund-Yates as commenting yesterday that the latest dip in Sainsbury’s sales was not ‘a complete surprise,’  pointing to tough comparisons with the prior year’s figures, when the royal wedding boosted sales.

“Looking ahead, the group said conditions are set to remain uncertain,” she said, adding that the supermarket sector was “still seeing competitive pressure, meaning the likes of Sainsbury’s are being forced to push prices down across core products”.

“So, while last year’s strong performance makes this trading update harder reading, the real challenges are coming from the wider industry,” the analyst concluded.

Other analysts on blue-chip grocer

The BBC meanwhile quoted Thomas Brereton, retail analyst at GlobalData, as commenting that the price cuts showed that Sainsbury’s was ‘trying to compete,’ while cautioning that “its more premium image means it will continue to stumble if it tries to overcome its competitors on price”.

Shore Capital reaffirmed the blue-chip supermarket as a ‘sell’ yesterday, without specifying a target on the Sainsbury’s share price. According to MarketBeat, the FFTSE 100 group currently has a consensus ‘hold’ rating and an average valuation of 236.60p.