Shares in J Sainsbury (LON:SBRY) have fallen deep into the red in today’s session as Bank of America Merrill Lynch trimmed its rating on the blue-chip grocer. The move comes after the company recently updated investors on its full-year performance, cheering up investors with a rise in underlying profit and lower net debt.
As of 14:49 BST, Sainsbury’s share price had given up 1.87 percent to 210.10p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.1 percent lower at 7,253.56 points. The group’s shares have given up more than 28 percent of their value over the past year, as compared with about a four-percent drop in the Footsie.
BofA Merrill Lynch trims rating
BofA Merrill Lynch trimmed its rating on Sainsbury’s from ‘buy’ to ‘neutral,’ while lowering its valuation on the shares from 350p to 235p. Sharecast quoted the broker as commenting that following the collapse of the grocer’s merger with Asda, the focus had switched back to core retail, with the group flagging labour cost savings, better buying terms and own label range reset to be key drivers over the next 12 months.
The analysts, however, reckon that while the recovery plan is ‘encouraging,’ the recent underperformance versus the market is a concern and growth plans carry an execution risk.
The comments come after Kantar Worldpanel disclosed recently that said recently that Sainsbury’s sales had declined 1.2 percent in the 12 weeks to April 21.
Other analysts on supermarket
Sanford C. Bernstein, which rates the blue-chip grocer as a ‘market perform,’ lowered its target on the Sainsbury’s share price from 310p to 250p last week, while UBS reaffirmed the company as ‘neutral,’ without specifying a valuation on the shares. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average price target of 244.10p.