Sainsbury’s share price surges amid grocery sales improvement

Sainsbury’s share price surges amid grocery sales improvement
Written by:
Tsveta van Son
25th September 2019
Updated: 11th March 2020

J Sainsbury’s (LON:SBRY) share price has advanced in London this Wednesday as the blue-chip supermarket posted improved grocery sales. The company further updated the market on its plans for its banking arm and for its Argos division.

As of 09:11 BST, Sainsbury’s share price had added 2.49 percent to 218.30p. The shares a outperforming the broader UK market, with the benchmark FTSE 100 index having fallen deep into the red and currently standing 0.83 percent lower at 7,230.75 points.

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Supermarket posts trading update

Sainsbury’s posted a trading update this morning, revealing a 0.1-percent rise in second-quarter total retail sales, with like-for-like sales down 0.2 percent. The group’s grocery sales, however, rose 0.6 percent. The FTSE 100 supermarket’s general merchandise sales dipped by two percent, while its clothing sales surged by 3.3 percent.

“Sales momentum was stronger in all areas and we further improved our performance relative to our competitors, particularly in Grocery,” Sainsbury’s chief executive Mike Coupe commented in the statement.

Going forward, the company expects to deliver full year 2019/20 underlying profit before tax in line with consensus expectations.

Plans for Sainsbury’s Bank and Argos

Sainsbury’s further updated the market on its plans for its banking division, saying that it will stop new mortgage sales. The company also noted that it plans no more capital injections after £35 million in the 2019/20 financial year into the underperforming division.

The blue-chip supermarket also unveiled plans to close between 60 and 70 Argos stores, and open about 80 Argos stores within Sainsbury’s. Its store estate review and growth plans further include about 10 new supermarkets and 10-15 closures.

Sainsbury’s expects the closures to deliver an ongoing net operating profit benefit of £20 million per year. The supermarket, however, expects one-off cost of closures and impairments to be between £230 million and £270 million, of which the cash cost will be £30 million to £40 million.

According to MarketBeat, the FTSE 100 grocer currently has a consensus ‘hold’ rating, while the average target on the Sainsbury’s share price stands at 231.91p.

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