Stock of the day 06/01/2015 – J Sainsbury PLC

It looks like Sainbury’s is set for a disappointing start to the New Year as it looks to announce its Q3 2014/15 trading statement release on Wednesday.

2014 was a tough year for across the board for the supermarket sector, epitomised by the saga of Tesco’s inaccurate profit figures. This scandal helped drag down a sector that was already suffering from a change in the way its customers shopped, and Sainsbury was not immune to the toxicity stemming from its larger colleague.

After starting 2014 at £3.68 per share, Sainsbury quickly reached what was to be its yearly high on January 8th at a price of £3.82. Following that peak the company saw a steady decline, leading to a low of £2.13 in October, and a start to 2015 of only £2.46. This decline mirrored Tesco’s, and pointed to the daunting issues the big four UK supermarkets. Whilst Sainsbury’s year wasn’t as besieged with negative news as Tesco, it is still in a sector that is struggling to adapt to the new landscape it finds itself in, with upstarts Aldi and Lidl luring customers with their bargain prices.



The German bargain stores have only grown in popularity with no sign of this trend slowing down in the near future; Lidl posted a 20% rise year-on-year Christmas sales, and this growth will have taken a chunk out of the big four’s customer base. Sainsbury CEO Mike Coupe, who replaced the outgoing Justin King in the summer, already announced that the company may have to cut its annual dividend, and analysts at Bernstein are expecting 1.8% year-on-year sales decline for the supermarket chain over the Christmas period.

One area the big four can still laud over the German bargain stores that have become a perpetual thorn in their sides is petrol. With the price of oil in a constant downward spiral, Sainsbury, Tesco, Asda and Morrisons are locked in a desperate competition to undercut each other’s petrol prices. Sainsbury recently posted its seventh petrol price cut since December, as analysts speculate that it could sink to as low as £1 per litre.

The fervour with which the big four supermarkets are competing to slash prices, not only in petrol but in general, reflects the difficulties these megastores are experiencing in the face of the attractive bargain approach of Aldi and Lidl. Sainsbury is firmly in the Goliath camp of this underdog story, and its announcement tomorrow will likely set the negative tone for the rest of the big four’s festive trading statements.