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Sainsbury Share Price - SBRY

Share Name Share Symbol Market Type Share ISIN Share Description
Sainsbury LSE:SBRY London Ordinary Share GB00B019KW72 ORD 28 4/7P
  Price Change Price Change % Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +2.20 +0.91% 242.70 241.50 241.70 242.70 237.90 240.70 6,486,283 16:35:19
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m) RN NRN
Food & Drug Retailers 23,775.0 -72.0 -8.7 - 4,667.14

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DateSubject
13/11/2014
10:45
loganair: Are Tesco and Sainsbury shares a bargain? The share prices of the UK's biggest supermarket chains have collapsed this year so is now the time to buy? asks Questor: UK Supermarket shares have staged something of a recovery during the past month as investors go bargain-hunting and short-selling traders pull back on bets the shares will fall further. However, as yesterday’s results from Sainsbury’s show, there are few reasons to buy or hold these shares at the moment. Questor thinks investors should not be lulled into a false sense of security by the shares staging a comeback in the past month. Marks and Spencer] is up 22pc, Morrisons up 12.4pc, Sainsbury’s up 12.2pc, and Tesco has climbed 2.5pc since October 13. Investors in the big four supermarkets should instead focus on the fundamentals of value, with the dividends being cut, the value of assets underpinning the shares falling and little clarity on profitability going into next year. The gains made during the past month are also something of a mirage. Part of the reason for the shares rising is that short positions against supermarkets are being closed, an activity which requires the shares on loan to be bought. Hedge funds and traders have been betting heavily that supermarket shares would fall this year. Sainsbury’s shares were the most heavily shorted stock in the FTSE 100 in the weeks leading up to the strategic update yesterday. Using Sainsbury’s as an example, a hedge fund could sell the shares without owning them at 365p on January 2, then buy the shares at about 253p yesterday, close the trade and pocket the difference. Traders and hedge funds have made so much money from shorting the shares they are now closing their bets, which will cause the shares to rise. Investors have still been badly burnt this year. Tesco shares have collapsed by 43pc, Morrisons is down 33pc and Sainsury’s share price has fallen by 30pc during the past 12 months. Only Marks and Spencer has bucked the trend with shares up 9.2pc so far this year. There are several reasons why long-term investors should be staying away from UK supermarket shares. The first relates to the most important rule of value investing and that is capital preservation, or what Warren Buffett and Benjamin Graham call a margin of safety. What they are really looking for is that the value of all the cash, stock and property owned by the company is worth more than the current share price. This means that if the company goes out of business tomorrow, equity shareholders would still get something back. Capital would be preserved. There are concerns over the quality of those assets with supermarkets. Their largest asset is property, which is the extensive store portfolio around the country. Those huge out-of-town sheds are only worth something if they generate sales and profits, both of which are currently falling as discounters and convenience stores take customers. Sainsbury’s took a charge of £663m in its results for the first half ended September 27, related to its property portfolio. If the price war worsens and more customers move to the discounters those costs could get worse at Tesco and Morrisons. The second issue is that, when trying to decide the value of a share, you need to obtain a fair feel for future earnings. For this we need to get back to the very basics of what a share is to point out the stark realities facing investors in UK supermarkets. A share gives investors a claim on the future earnings of a company and on the assets once all other creditors such as banks and pension funds have been satisfied. In Sainsbury’s half-year results yesterday it reported a loss before tax of £290m, compared with a £433m profit last year. Net debt increased to £2.38bn, from £2.18bn a year earlier, which means the interest costs will probably rise. The pension deficit remained stubbornly high at £687m, down by £50m from six months earlier. The problem is that market consensus for the year ended March 2015 is that adjusted pre-tax profits will fall by almost £230m to £670m on revenue of about £24.1bn, giving a profit margin of about 3pc. When Justin King arrived at Sainsbury’s, he halved the profit margin from around 3pc to about 1.5pc. Applying the same logic would lead to about £360m in pre-tax profits, or about 16p in earnings per share for the year ended March 2016. A sustainable dividend on those earnings would be about 8p, less than half the current 13.4p estimated full-year dividend. Sainsbury’s also said it will slash the final dividend payment by more than 30pc. The interim was held at 5p and the company said it would pay “a full-year dividend covered by two times adjusted earnings for the next three years”. Given an adjusted full-year earnings forecast of 26.8p, that equates to a dividend of 13.4p, or a final dividend of 8.4p, which is 33pc lower than last year’s 12.5p final. Sainsbury’s has cut spending on new stores to shore up the balance sheet. The company said it would spend between £500m and £550m on capital investment, down from £950m in the past two years. So two of the major props that underpin UK supermarket share prices are looking very shaky: the balance sheet value and the dividends. One of the other factors that investors need in order to value a share is a reliable earnings stream. Share prices are usually valued on a multiple of the earnings, something called the price to earnings, or P/E ratio. At the moment the multiple for UK supermarkets is about nine to 10 times earnings. The problem is that the earnings figure is so volatile. Morrisons is probably the best example here for volatility of profits. From 2010 to 2013, the Bradford-based supermarket group’s pre-tax profits stayed steady at about £850m, giving about 25p in earnings per share. The group then slumped to a loss of £176m this year and is forecast to make about £385m, or 12.7p in earnings per share to January 2015. The profits could be worse next year if a price war breaks out. Applying those earnings to the multiple of 10 times gives you anything between around 250p down to about 127p. Each of the elements that underpin the share price in the UK supermarket sector are far too volatile. Sell.
21/6/2015
17:31
loganair: Why I Won't Be Buying Shares In J Sainsbury By John Kingham: J Sainsbury along with the other major supermarkets, has been through the wars in recent years. Most people know the story by now, if only because of the more severe and highly publicised problems at Tesco. J Sainsbury: It's a supermarket Here's my extremely short version of the backstory for J Sainsbury. The big four UK supermarkets (Tesco, WM Morrison, J Sainsbury and, to a lesser extent, ASDA) had it fairly easy. As long as they did a half decent job, millions of shoppers would continue to shop with them. But then along came the Financial Crisis and the Great Recession, and shoppers had far fewer pennies to spare and more time on their hands to shop around. The result was a change of shopping habits to more frequent and smaller shopping trips, at local stores that focus on price more than anything else. That played right into the hands of discounters Aldi and Lidl, who fitted this new shopping behaviour like a glove. The initial response from the big supermarkets was to ignore the discounters, but that was a massive mistake and the big four have been losing market share and struggling to adapt quickly enough ever since. A highly successful company, until recently: things had been going very well. The company has a long and unbroken record of dividend payments and, in recent years, revenues, profits and dividends had all been going strongly. Its statistics for the last 10 years look like this: •Growth Rate (covering revenues, profits, dividends) of 6.4%, well ahead of the FTSE 100's anaemic 0.8% •Growth Quality (frequency of revenue/profit/dividend increases) of 75%, also ahead of the FTSE 100's mediocre 50% •Net ROCE (median over 10 years, net of interest and tax) of 5.4%, below the large company median of 10% So J Sainsbury has grown fairly quickly and smoothly over the last decade, including the profit and dividend decline in the 2015 results. However, its profitability as measured by Net ROCE (Return on Capital Employed) is weak. Because I use post-interest and tax profits as the "return" part of ROCE, this low profitability figure could be because Sainsbury's core business isn't very profitable, or because the company has lots of debt (and hence large interest payments) or other non-operational expenses, or both. In fact, Sainsbury's profitability is so low that it effectively rules the company out as an investment for me. I currently use the following rule of thumb: Only invest in a company if its 10-year median Net ROCE is above 7% J Sainsbury fails that test, so that's the first reason I would be buying the company's shares. But there are other reasons too. Its financial obligations are too large for my liking One of the reasons for Sainsbury's weak profitability is its large debt obligations. It has £2.8bn of total interest-bearing debts as at the 2015 annual results. That sounds like a lot and it is, especially as the company has "only" earned an average of £0.5bn in post-tax profits over the last 5 years. Another large financial obligation is its defined benefit pension scheme. Because the company must ensure that its pension fund assets exceed the fund's liabilities, it must pour cash into its pension fund if there is a deficit. And that's exactly what it's doing today. The pension fund obligations stand at £7.7bn, while the pension deficit is £0.7bn. That deficit must be closed, and the company has agreed to pay £49m into the scheme each year until 2020, which currently amounts to almost 10% of the company's post-tax profit. And so for J Sainsbury we have: •Debt Ratio (ratio of total borrowings to 5-year average post-tax profit) of 5.2 •Pension Ratio (ratio of pension obligations to 5-year average post-tax profit) of 14.4 •Combined Debt and Pension Ratio of 19.6 Unfortunately, those ratios break some of my other rules of thumb: •Only invest in a defensive sector company if its Debt Ratio is below 5 •Only invest in a company if its Pension Ratio is below 10 •Only invest in a company if its Combined Debt and Pension Ratio is below 10 So along with "too low" profitability, J Sainsbury also has "too high" financial obligations for me. As a result, I won't be buying the company's shares anytime soon, no matter what the price. The shares are attractively valued, if you ignore the other problems Even though I wouldn't consider buying the company's shares at the moment, I'm crunching through the accounts anyway so I might as well take a look at what share price might be considered "fair value" given its financial history. The caveat here is that this fair value would only apply if the company wasn't breaking any of my rules of thumb, but it's still an interesting value to calculate. As J Sainsbury has a slightly above average record of growth, its shares, according to my valuation system, deserve a slightly above average rating. With its shares currently at 261p, the company's valuation multiples look like this (compared to the FTSE 100 at 6,700): •PE10 (price to 10-year average EPS) of 10.9, which is lower than (better than) the FTSE 100's 14.0 •PD10 (price to 10-year average dividend per share) of 18.5, which is lower than (better than) the FTSE 100's 32.9 •Dividend yield of 5.0%, higher and better than the FTSE 100's 3.5% So in terms of valuation, J Sainsbury is significantly more attractively valued than the FTSE 100. Its share price is cheaper than average, relative to past earnings and dividends, and the dividend income yield is above average. And remember, the company also has a better track record of growth than average, so if anything it should be on higher valuation multiples than the index (ignoring its various problems, of course). To calculate fair value for the company's shares, I can adjust its share price until it has a middling rank on my stock screen. At its current 261p, J Sainsbury has a rank of 47 out of 230 companies on the screen, so it is one of the most attractively valued (again, ignoring its problems). For the shares to be "fairly valued," they would have to increase to 450p, which is some 72% above their current share price. At that level, the shares would have a historic dividend yield of 2.9%, which I think would be reasonable as long as the company's successful past could be replicated in future. However, the company's profitability is too low for me, and its financial obligations are too large, so I won't be investing at the moment. Note: Last time I looked at J Sainsbury's shares, I was much more upbeat. However, since then (May 2014), I have become more cautious about both profitability and financial obligations (partly as a result of the problems with Tesco and Morrisons), so under my now much stricter system, the company has gone from a buy to uninvestible.
30/9/2014
21:55
loganair: Sainsbury dividend cut seems inevitable Supermarket hasn’t escaped bad times for the ‘Big 3 grocers’ Sainsbury’s shares have been perky today and on the face of it, that’s a little surprising. It will release its much-awaited second-quarter trading update tomorrow (Wednesday 1st October) and given the dark clouds hanging over the prospects of the big, UK-listed grocers , it would have been less surprising if the shares had fallen. On closer inspection though, Sainsbury’s 1.7% share price rise today is little more than the natural pause any stock will show in the midst of a confirmed downtrend. Sainsbury’s stock has gone from a peak of 428p reached in November last year, to nudging lows last plumbed in June 2008, below 250p. That represents a share price fall of more 41% in less than a year and is much more in keeping with investors’ pessimistic expectations for tomorrow’s results. Same-store sales probably fell 3%-to-5% in second quarter It’s clear tomorrow’s results are likely to show the third-largest supermarket chain in the UK (by consumer spending) has had as gruelling year as widely be expected, judging by the calamitous trend of its closest peer Tesco. The havoc wreaked on Britain’s ‘Big 3’ grocers (or ‘Big 4’ if we include American-owned, but UK-based Asda) by upstart discounters like Aldi and Lidl is already infamous. Suffice to say grocery market share grab by low-cost supermarkets shows no sign of slowing. Data released a few days ago showed Aldi increased sales by 29.1% year-on-year and Lidl leaped by 17.7% in market share figures for the 12 weeks to 14 September. Retail data provider Kantar Worldpanel also showed Waitrose sales rose 4.5% and placed Asda as the only major UK grocer increasing share, with a rise of 0.8% to 17.4% market share. Tesco is well known to be reeling from a host of problems. These were crowned by its sales falling 4.5% leaving it with a market share of 28.8%. Morrison’s sales fell by 1.3%. That brings us back to Sainsbury. Its sales fell by 1.8%, leaving its market share down at 16.2%. In keeping with that, we’ve noticed stock market consensus forecasts of Sainsbury’s closely-watched same-store sales performance have been steadily falling for months. (Same-store sales remove contributions from stores open less than a year. Most major UK supermarkets also exclude petrol sales from the figure.) Whilst in June, the supermarket’s CFO, John Rogers, strongly suggested same-store sales would match their fall in the first quarter, 1.1%, our view is that the continued deterioration in grocery sales will mean store Sainsbury’s sales are bound to be worse than that in the first quarter. We expect Sainsbury to report a 3.5%-to-5% fall in like-for-like sales tomorrow. We see total sales flat quarter-on-quarter at 1%. Dividend news is likely to be bad as well The other big watch point is of course the dividend. With no respite in sight for the ‘Big 3’ we think something’s got to give at each of them. More profit warnings are not out of the question. Even a ‘cash call’, (AKA rights issue) under certain conditions, specifically for Tesco, might be possible. (A rights issue will usually weaken a company’s share price.) For Sainsbury, a rights issue seems unlikely. But, Sainsbury’s management have given themselves lots of leeway to slash the pay-out for the sake of ‘investment in margin’ (to use the grim catch phrase many UK supermarkets have adopted lately as a euphemism for price cuts.) Sainsbury has pledged to try to keep ordinary dividend cover at least 1.5 times its underlying earnings per share. Its dividend for the last fiscal year was 17.3p with coverage of 1.9 times EPS. But we already know consumer spending at Sainsbury in the most recent 12-week period fell by almost 2%. To keep things simple (and to assume a best-case scenario) let’s say these falling sales equate to a fall of about 2% for the whole fiscal year. Bearing in mind EPS was 33p last fiscal year, with an operating margin of 3.65%, even with coverage of 1.9 times (same as last year) the annual dividend would automatically fall 28 basis points this year to 17.02p. But such a dividend fall is still based on ‘lenient forecasts’ and the pay-out would remain within Sainsbury’s ‘at least 1.5 times’ coverage policy. With Sainsbury stock now yielding about 6%, a dividend cut tomorrow versus market expectations suggests something closer to 50%. The market is very likely to react to any dividend downgrade in way that makes today’s 4.2p share price gain look like small change. Note the shares are currently balanced on a support line that has stood the share price in good stead for more than a decade. Below that is second-line defence close to 210p.
21/11/2014
18:02
loganair: J Sainsbury plc vs Wm. Morrison Supermarkets plc vs Tesco PLC: Which supermarket Will Win In 2015? 2014 has been nothing short of a disaster for investors in J Sainsbury, Wm. Morrison and Tesco. That’s because the share prices of the three stocks have fallen by 28%, 29% and 41% respectively during the course of the year. Clearly, the reason for the share price falls has been poor operating performance, with a price war and shifting consumer tastes causing the bottom lines of all three companies to decline. Furthermore, forecasting errors at Tesco have also weighed heavily on its share price, which has dented investor confidence in the company to a relatively large degree. Margin Of Safety: The market seems to be of the opinion that much worse is still to come for the three supermarkets. This is best evidenced through looking at their current valuations, with Sainsbury’s having a price to book (P/E) ratio of 0.8, and Morrisons’ and Tesco’s P/B ratios being 0.9 and 1.1 respectively. All three of these figures are exceptionally low and, as a result, include a wide margin of safety. In other words, if things do get worse then the share prices of the three companies may not be hit as hard as they have been and, should things fail to get worse, there could be scope for an upward rerating. The Turnaround: In terms of potential catalysts for improved future operational performance (or at least a stabilisation), there seem to be three main areas of hope for investors in the stocks. The first is a shift in consumer tastes away from the no-frills shopping experience of the likes of Aldi and Lidl and toward the better service and selection that major supermarkets offer. This could take place as a result of increases in real disposable income that are expected in 2015, with next year expected to be the first time that wage growth outstrips inflation since the start of the credit crunch. The second potential catalyst is a slowdown in the rate of growth of discount stores such as Aldi and Lidl. Indeed, the two companies have grown extremely quickly and been hugely successful in recent years. However, they are unlikely to grow at such a vast pace in perpetuity and, inevitably, there will be a slowdown in their rate of growth. This could be because further locations are not as prime as existing sites, and also because of a saturation within the no-frills space. This leads to the third potential catalyst, which is for Sainsbury’s, Morrisons and Tesco to compete directly with no-frills operators through new ‘discount̵7; brands. At present, only Sainsbury’s is trying this option, in the form of a joint venture with Netto; however, Morrisons and Tesco may follow should it prove successful. Such a move could bring back previous customers and persuade existing customers to stick with the Sainsbury’s/Morrisons/Tesco brand, albeit in a slightly different form moving forward. Looking Ahead: With Sainsbury’s, Morrisons and Tesco all due to post disappointing bottom line figures in the current year, with profit falls of 18%, 51% and 48% expected (respectively), the short term could see little, if any, improvement in their share prices. This will especially be the case if they endure a lacklustre Christmas trading period. However, looking ahead to 2015, all three companies could see a stabilisation in their performance. Certainly, the turnaround of these three companies will take a lot longer than one year, but the green shoots of recovery could begin to sprout next year, as the UK consumer finally starts to feel the effects of an improved economy in his/her back pocket. As for which of the three supermarkets could be the best buy… Sainsbury’s has the lowest valuation and is the only one that is attempting to beat the no-frills operators at their own game. As a result, it appears to be the leader of the three when it comes to investment potential, although lumps and bumps must be expected by investors in all three stocks over the short to medium term, while J Sainsbury could prove to be the winner of the three supermarkets in 2015.
07/11/2014
11:07
loganair: The last few years have seen a seismic shift in the supermarket sector. No-frills operators such as Aldi and Lidl have grabbed a significant amount of market share from the incumbent supermarkets, resulting in increased competition and decreased profitability for the likes of J Sainsbury. As a result, J Sainsbury has seen its share price fall to its lowest level this century, with it hitting a low of 224p just a few weeks ago. Since then, however, sentiment has improved significantly and has meant that the company’s share price has increased by over 20% in the last three weeks. However, this could just be the start of J Sainsbury’s fight back, and it could beat Aldi and Lidl in 2015. Here’s how. Netto: Readers may or may not be familiar with the Netto brand, which is a Danish supermarket that had a presence in the UK until it was bought out by Asda in 2010. J Sainsbury has entered into a joint venture with Netto and plans to open around fifteen stores, mainly in the north of England, as it aims to appeal to a different price point of customer. Indeed, the Netto brand will aim to win over shoppers who have deserted the major supermarkets in favour of Aldi and Lidl, and will offer a no-frills shopping experience. Just as Aldi and Lidl offer mostly their own brands, Netto will do the same but will also sell branded favourites too. The focus will be on efficiency, so staff numbers will be kept to a minimum and all available space will be used to stock as many items as possible. The first Netto store is set to open in Leeds and, as mentioned, subsequent stores will be opened in the north of England. This makes sense for J Sainsbury, since its store footprint is mainly in the south of England, so it is unlikely to ‘tread on its own toes’. Furthermore, the Netto brand allows J Sainsbury to go head-to-head with the likes of Aldi and Lidl without destroying the value of its brand. J Sainsbury is currently viewed as a mid to upper price point operator, and Netto allows it to maintain such a position moving forward. Looking Ahead: Clearly, there is no guarantee that the Netto brand will be successful. However, it has the same ingredients as Aldi and Lidl, so it should at least be able to hold its own in the no-frills, discount space. This could mean that things do not get much worse for J Sainsbury in the near term, with regard to losing market share and seeing a decline in its profitability. Furthermore, even a stabilisation of its performance could lead to considerable share price gains. With shares in J Sainsbury trading on a price to earnings (P/E) ratio of just 10.8, they are still very cheap. In addition, a yield of 4.7% remains highly lucrative and is well covered by earnings at 1.9 times. Therefore, with a large margin of safety included in the current share price and the potential for better sales figures moving forward (aided considerably by the Netto joint venture), J Sainsbury could have a prosperous 2015 and beat the likes of Aldi and Lidl.
19/8/2015
17:21
buys in jars: I do not agree 1) the NAV is much higher than the conversion price. dont forget these guys have invested £23 billion in the business since 1987, but the share price is still the same. 2) they are using this NAV to attract new shareholders, diluting the existing shareholders 3) the money is being spent on this crazy pricing war, driving margins to the bone 4) the share price has plunged 10% since they launched the convertibles 5) the terms on the previous convertibles is much worse, as the price is adjusted downwards, every time there is a dividend yielding more than 1% 6) why do they need to raise money if they are cutting costs and investment by £1 billion?
26/5/2015
15:12
loganair: By Harvey Jones - The sun is out and Britons are shopping again. UK retail sales rose 1.2% in April, the fastest pace since last November, and far higher than the 0.4% the market expected. At first glance I thought that would be good news for ailing supermarket giants Tesco, J Sainsbury and WM Morrison. But a closer look at the figures shows that the real growth was in clothing, footwear and textiles, which jumped 5.2% compared to March, the biggest rise for four years. Every retail sector showed growth with one notable exception: food. Food Inglorious Food: Food sales actually fell 0.1% in April, as supermarkets continue to suffer from weak demand. The figures follows Asda reporting its worst quarterly sales in more than five years, with its chief executive complaining that customers were “not yet cash-confident”;. Latest figures from Kantar Worldpanel show grocery price inflation falling 2.4% in the year to April, one of the main reasons why the UK has slipped into deflation. Lower prices have taken out £532m from supermarket tills over the year. That does enough damage to margins at Tesco, Sainsbury’s and Morrisons, even without the threat posed by Aldi and Lidl, whose market share has more than doubled from 5% to 11% in the year. The Inconvenient Truth: I swept the supermarkets from my portfolio just over one year ago, happily, when Tesco still fetched 326p. Despite its recent share price rally, it still trades well below that price at 219p. I admire the way new boss Dave Lewis has set about tidying up Tesco’s shelves and a return to real wage growth will give him a helping hand. But it can surely never enjoy its former dominance, given the challenge it faces online retailers, convenience stores and those German discounters. War Is Stupid: It is hard to escape the sense of long-term decline when you see that Tesco’s share price is 44% lower than five years ago, while Sainsbury’s is down 18% and Morrisons is down 31%. Over the same period the FTSE 100 has risen 37%. There are signs the position is stabilising, notably at Sainsbury’s, where sales fell just 0.1% over the past year, making it the best performer of the three. The costly price war may now have moved on to a new phase, with even Lidl now promoting itself on quality and freshness, rather than just price. Deflation could work in favour of the big supermarkets, by making their customers think about other things rather than price. But it isn’t enough to make help me regain my appetite for this sector. There are far tastier growth opportunities on the FTSE 100.
22/10/2014
13:03
loganair: Sainsbury’s has had an unpleasant year. Its share price has almost halved since January and it now sits on a lowly PER of 7.5x. Its share price has been dragged down alongside Tesco‘s and Morrisons‘ and it could be argued that negative sentiment regarding the sector as a whole has unfairly hampered Sainsbury’s share price performance. Yet it could also be argued that the structural headwinds facing UK grocers — think aggressive, well-funded European competition, food price stagnation and protracted price wars — are simply too much for good management alone to make much of a difference over the next year. The Best Of A Bad Bunch? Sainsbury’s has arguably been seen as the pick of the UK grocers. It is perceived to have a more upmarket consumer base to its peers, which is better protected from Aldi and Lidl’s current UK market share raid. This sentiment only partially holds up to data. The latest Kantar Panel findings show that Sainsbury’s share of the market fell by 0.4% to 16.2% during the 12 weeks to 14 September — significantly better than Tesco’s 1.4% slide to 28.8% of the UK market. However Aldi, Lidl, Asda and Waitrose actually grew their market share over the same time-frame, while Morrisons and The Co-operative fell by less. This raises questions concerning the assumption that Sainsbury’s market share is better protected than its rivals. True, it has a strong presence in the South of England, while the discounters are focusing on northern regions (for now). Management must also be commended for the timely expansion of convenience stores and its online offering, at least by the standards of the industry as a whole. The same can be said of its smart joint venture with Danish discounter Netto, which will see the launch of 15 new Netto stores by the end of 2015. Rights Issue Rumours As soon as Morrisons announced its price-cutting strategy in a bid to tempt consumers back from Aldi and Lidl, Sainsbury’s and Tesco had to follow suit. There are consequences to price wars of this nature, however. Cutting prices often requires a re-basing of earnings forecasts, as consumers initially buy the same amount or even more while actually spending less. The rationale is that word will get out of the supermarket’s low prices and, eventually, more consumers will shop there for the bargains. Increased consumer volume ends up trumping reduced average spend. This does beg the question of how supermarkets take the painful initial hit to bottom-line profit of such extreme tactics. Morrisons dutifully re-based its earnings targets and warned over expected lower margins, freeing up billions to fund its price cutting campaign. Tesco has slashed its dividend. As for Sainsbury’s, there have been persistent rumours of a rights issue, but nothing has happened yet. There is more to come here, and it may not be positive. The situation in the UK grocery sector may well be bearish for a while. Although these shares only sit on a PER of 7.5x, earnings visibility has been markedly reduced by competition and price cuts — and as such, they are for now uninvestable.
16/7/2015
14:05
buys in jars: this was 11 years ago and the share price was exactly the same as it is today http://www.theguardian.com/business/2004/nov/07/theobserver.observerbusiness The Sainsbury family would consider selling their 36 per cent stake in the ailing supermarket chain for 400p a share, according to sources close to the company. But the figure represents a 50 per cent premium to Sainsbury's closing share price of 267p on Friday and would be a huge financial undertaking for the two consortiums currently considering bids. At 400p a share, Sainsbury would be valued at £6.6 billion. The family believes that its selling price is so high (the shares have not been at that level since the summer of 2002) that no venture capitalist group could make the numbers work. Nevertheless, City investors say that the family would have to lower its sights if new chief executive Justin King could not restore the company's fortunes in the next 18 months. One shareholder, who declined to be identified, said that institutional investors would take less than 400p, but he admitted that a bid without the support of the family would be impossible. One consortium eyeing Sainsbury is understood to be spearheaded by Allan Leighton and Archie Norman, the former retailing executives who restored Asda to corporate health in the 1990s before selling it to Wal-Mart. Another possible bidder is investment banker George Magan, a former treasurer of the Conservative Party. But neither group is thought to be willing to pay much more than 300p a share.
16/12/2014
10:32
loganair: We used to think of the supermarkets rather like we think of Apple: a remorseless trend of expansion, growing profits and a growing share price. The more smartphones Apple builds, the more they sell. The possibilities seem almost infinite. No tree grows to the sky: But no tree grows to the sky; eventually the tree’s height is countered by the pull of gravity. Growth always has its limits. And so it has proved with the supermarkets. The supermarkets are now starting to think less like Apple, and more like OPEC. They have realised that, while retail demand in the UK has remained largely static, supermarket supply has been increasingly linearly all the way since the 1950s. It’s been a simple process. Each decade the supermarkets have built more shops, and they have increased their sales, and their profits. And their share prices trended higher and higher. This continued until about the time of the Credit Crunch, when something interesting happened. Ever since the Recession the supermarkets have still been expanding, yet they have no longer been growing sales, and their profits have begun to fall. The share prices of these retail giants have begun to trend downwards. A long road to recovery: This year the supermarkets’ results have been terrible. It’s as if they have hit a brick wall. People initially talked about Tesco having difficulties, but we can now see that Tesco, Sainsbury, Morrisons, Asda and even Waitrose have all been suffering. This thing is happening across the board. Until now I have thought of the supermarkets as contrarian plays and turnaround prospects; my view was that their difficulties were just bumps in the road. But these results have made me think that there is something more fundamental at work here. Some investment experts have started to talk about the supermarkets as value traps. This sounds very harsh. But is there the possibility these experts may be right? I am certainly holding off from investing in this sector, no matter how low share prices have already fallen. The balance between supply and demand has been lost. The supermarkets need to shift their focus from volume to profitability. In the past, increasing volume meant increasing profits. In the future, it will mean decreasing profits. As the economy improves, retail receipts will start to rise. This gives the supermarkets hope, but the road to recovery will be long. I think it is still much too early to invest. Investing in stocks and shares is not easy. At one point the supermarkets looked like a sure thing; yet now investors seem to be steering clear.

Sainsbury Most Recent Trade

Trade Type Trade Size Trade Price Trade Date Trade Time Currency
4,263 240.46 28 Aug 2015 16:42:55 GBX


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