Sainsbury's: What the analysts say

“We expect space growth to be reduced further, as Sainsbury considers the need to increase returns for shareholders, the implications of its excellent performance online in food, the unfavourable long term outlook for non-food sales per square foot and its relatively untapped brand potential in non-food online.” – Philip Dorgan, Panmure Gordon

“As is the case with many retailers who are succeeding during the downturn, much of Sainsbury’s success can be put down to the presence of a clear strategy and solid execution. This has helped to create a sense of energy and forward momentum within the business.

On the strategy front, Sainsbury’s continues to successfully steer between delivering good quality food and promoting compelling value for money messages. Charting such a course sounds easy in theory but, as both Tesco and more recently Morrisons have found to their cost, it is difficult to execute well. Sainsbury’s has kept both plates spinning with initiatives such as the on-going own label refresh delivering growth and Brand Match helping to increase loyalty and prevent switching.” – Neil Saunders, Conlumino

“Sainsbury has already announced its sales figures for the first half, up 1.7% like-for-likes, so the main interest in today’s interims is in the comments about margins and the industry outlook. The City was looking for 4%/5% growth in first half pre-tax profit to £370m-375m and the outcome is bang in line at £373m. The ebullient and long-serving chief executive Justin King says ‘Whilst the wider economic situation remains challenging, we are well positioned to help our customers Live Well For Less. Our long-standing consistent strategy, combined with our customer insight and strong value-driven culture, will continue to deliver for customers, colleagues and shareholders’, but there is no sign of him announcing that he is going to retire.” – Nick Bubb, independent retail analyst

“Against a backdrop of still tight consumer spending and an increasingly competitive trading environment, including a market leader investing 80-90 basis points of margin in its price and service proposition, Sainsbury has reported a very solid set of interim results in our view, which are a little above Shore Capital’s expectations.

“As already reported, trading has proved robust through first half with total (ex-fuel) sales growth of 4.1% and like-for-like growth of 1.7%, the leader of the Big 4, sales growth in general merchandise remains robust with growth three times faster than the food business. On the margin front we are encouraged that despite considerable investment elsewhere in the sector, Sainsbury has delivered a flat EBIT margin performance at 3.4%, benefiting from £60m of savings which is expected to increase to £100m for the full year.” – Darren Shirley, Shore Capital